How often have you thought about switching to Multi Level Marketing rather than being dependent on traditional selling channels to sell your products, such as retail outlets?
As a business owner, if you are thinking of switching to MLM or are already running it, you will know how Multilevel Marketing companies make good use of distributors tied with the company with different compensation plans to grow their direct selling business.
The distributors are solely responsible for selling, and the compensation plans keep the distributors associated with the business for a longer time.
Multi Level Marketing is all about direct selling, or as we would like to call it, personalized selling, which is suitable to market and sell your products and help create a better and healthier relationship with your distributors and customers. While various MLM compensation plans may be available, the Binary and Matrix ones are known widely for their innovative approaches. This article will help you completely understand the difference between the binary vs. matrix MLM compensation plans so that you are able to make the right choice of which MLM compensation plan to start off with.
What is Binary Compensation Plan?
A binary compensation plan is a structure used in multi-level marketing and network marketing to organize and reward distributors for their sales efforts and team building. The compensation plans differ in their structures, and the structure of the Binary compensation plan has been a huge hit primarily because it has helped various companies reach high success levels.
Each distributor in a binary compensation plan has a limit of not having more than two distributors in their first level of sales. It is supposed to consist of two legs (right and left), and every distributor has a subtree, so a binary tree is formed.
How does a Binary Compensation Plan work?
Every distributor in a binary compensation plan has to purchase an enrollment package which is either a list of products or services that your company has. Once the distributor has bought the enrollment package, he becomes part of a binary tree of distributors of your company.
Each new member that is sponsored by a distributor in a binary compensation plan is added either on the left or the right leg. A binary tree is formed by adding two new members on each side of the subtree. After the binary tree is formed, all the added members are then spilled to the downlines.
A binary tree is always infinite and never gets completed. The tree is only formed when the left and right legs are filled, and more members are added as the downlines.
Advantages of Binary Plan:
Here are the main advantages that a Binary MLM compensation plan has to offer:
- The sponsoring member will benefit from the success and placement of new members beneath – which is common to most compensation plans.
- The binary plan has the potential of unlimited depth which is not offered by most of the other MLM plans.
- The businesses are free to decide how many members are required to be placed on each leg. Which again means that the tree is infinite and each leg can grow downwards, infinitely.
- The plan has the capacity to grow faster because of having freedom to enjoy unlimited distributors.
- In Binary MLM Compensation plan, there is a concept of ‘two-to-infinity’ payout which means no matter how many members you add on the down-line you get to have the same commissions and compensation from a person in your down-line.
- You know that in the Binary MLM plan there are two legs. The up-line guides you to build one leg yourself while the other leg is built by themselves. This means half of the work will be done by the other entity which may turn out to be more experienced than you.
Extending the advantages further, if you are using an MLM solution or software like the Global MLM Solution,the Binary plan is the easiest to understand for most businesses who are starting off their MLM journey.
What is a Matrix Compensation Plan?
A matrix compensation plan is a type of multi-level marketing or network marketing compensation structure that organizes distributors into a fixed-width and fixed-depth matrix.
How does a Matrix Compensation Plan work?
The plans of an MLM Matrix compensation plan are written in an x*y form where the x represents the width of the plan while y represents the dept. So, if it is a 3*2 matrix plan, the width of the plan will be three distributors on the first level. You can add no more distributors to this level anymore.
The next joining members in this plan are then added to the next level, which is the second level. In this example, the matrix's depth is two, which means the second level would be the last one.
So, if three members are added to all the three distributors, the total number of members in this matrix will be 13. This includes one sponsor, three distributors, and nine second-level members. While this may seem like a limited plan, looking at all the members working as a team for business success can turn out to be great for the MLM business owner.
Advantages of the Matrix Plan:
Here are the main advantages that a Matrix MLM compensation plan has to offer:
- The distributors team mostly remains as a close-knit team as there is a fixed number of people who can join the matrix.
- There are great earnings for the members in the form of commissions, rewards, bonuses, and royalties, the reason for it is that it is not an infinite tree.
- It is pretty easy and straightforward to manage.
- The senior members can easily guide and encourage the distributors to build their confidence levels and skills because there is a fixed number of frontline members.
Comparison between Binary and Matrix MLM Plans:
Now that binary and matrix MLM plans have been described in detail to clear out your concepts, here is the comparison between the two to make it easier for you to decide which one you should go for. Here are the basic things that both these compensation plan differ in.
Spillover Preferences:
There are two spillover preferences in a matrix MLM plan, including:
- Top to bottom and left to right: This spillover is in which new members are added according to the vacant positions from left to right positions or top to bottom levels.
- Alternative: This spillover is carried out alternatively, and the members are placed under each member in the first level in alternative positions.
The Binary levels have five spillover preferences, including:
- Weaker or stronger leg spilling: The preference is set to either of the legs or is made to side with the weaker or stronger leg according to sales volume.
- Multi-center tree spilling: The distributors are offered multiple positions in a binary MLM tree at various times. Upon completion of the set criteria, the distributors are allowed to have new business centers. The payout of the distributors is multiplied according to the number of business centers and sales volume.
- Extreme left or extreme right spilling: The distributors can be given a place on either the left or the right leg, depending on vacant positions.
- Balanced spilling:The distributors are then spilled with a 1:1 ratio to balance both the legs.
- Holding tank spilling Along with following the preferences set by the MLM company, the business members can also hold new members and place them in the tree for additional benefits.
Downline Expansion:
Due to being infinite and having an easy layout, the downline expansion is relatively easier for the binary compensation plan. The limit on the matrix compensation plan makes it complicated.
Multiple Legs:
While the number of legs is limited to two in a binary MLM plan, this is not the case with the matrix MLM plan. In a matrix MLM plan, there are multiple legs on which the distributors can be placed according to the depth and width of the matrix.
Implementation:
Implementing a binary MLM plan is quite simple and easier compared to the matrix MLM plan. This is because the Binary MLM plan is limited to two members under each distributor. In contrast, in a matrix MLM plan, each distributor can have various members working under them, making things complicated.
Cost or Profit Comparison:
A binary MLM plan will be a good option since it is more ‘profitable’ than the matrix MLM plan.
The reason being that the Binary MLM plan has only two frontline distributors and the profit earned is distributed only among two people making the up-line have additional earning even when being on a tight budget. This is not the case with matrix MLM plan as the width of each line can vary and have more than two members and thus the earnings and profits get more distributed.
Additionally, the Matrix MLM plan offers five types of bonuses among the team including sponsor bonus, level commissions, matching bonus, position bonus and forced matrix bonus which means the commission will get more divided among all. While for the binary MLM plan, there are only three commissions namely sponsor bonus, pairing bonus and matching bonus which makes it relatively more cost-friendly since it gets less divided compared to the matrix plan.
Depth Limit:
There is no limit on how a distributor decides to build his network in a binary MLM plan. This does not apply to the matrix MLM plan since the depth is limited to certain members only under each distributor.
In a binary MLM plan there is no depth limit and the distributor can enjoy unlimited depth of commission. However, for a matrix MLM plan the commission is limited to a certain depth.
Downline Matching:
The downline matching is not much essential for binary MLM, but it plays a vital role in helping the matrix MLM work better.
Teamwork:
Teamwork doesn't make much difference in the binary MLM plan, and even when a member is lazy, it will not affect the whole team's work. However, the success of a matrix MLM plan is entirely dependent on the teamwork of the entire network.
Final Thoughts:
Both the Binary and Matrix MLM plans are available today to provide the benefits they have to offer for any kind of business. If you are looking for an MLM plan that is not only easy to use but also provides some amazing benefits like excellent guidance from seniors and has the same compensation and commission for everyone, Binary MLM is your go-to option. But if addition of infinite members bothers you and you want to get indulged with limited members while enjoying significant group sales among distributors, matrix MLM plan is the one for you.
The MLM software can help your business generate leads, manage e-commerce tasks, automate the marketing process, and build powerful teams. You can now easily make the final call after reading the binary vs. matrix MLM compensation plan comparison and the benefits these plans offer.
