Driving Behaviour

It’s not all about the compensation plan
After 5 years of helping companies move into MLM and setting up MLM compensation plans I have come to the realisation that they are “ALL” unique. Every company employs the services of an expert. They crunch number, tweak royalties and bonuses, develop breakage strategies, implement promotion and demotion plans and introduce new “never seen before” mechanisms that are “guaranteed” to send the members into a frenzy of recruiting and selling.

The truth is that the compensation plan is only one small part of what drives a Network and it’s not the most important part at that.

The aim is to design a total program that will drive desired behaviour. The first step therefore is to decide what behaviour you desire.

Companies are divided into two broad categories when it comes to desired behaviour. On the one side you have consumer networks and on the other you have sales networks.

Consumer networks:

In this category the network consumes the companies products and focuses on recruiting. The bigger the team gets the greater the consumption becomes.

Advantages:

• Members join primarily to receive a discount on the products. This provides the company with a loyal, stable and committed consumer base.
• +/- 20% of the network focuses on team building. These members are the ones who start earning commissions from the business.
• A few (two to three percent) will do the hard yards and will build enormous networks. These members are the top earners who are paraded before the masses as an example of what can be achieved.

Disadvantages:

• If the network is not consuming then no one is. Many members of consumer networks have huge teams with little or no volume.
• Your sales are governed by the size of your team.
• Due to the business focus of the team, consumer networks tend to develop an unjustified but prevalent bad reputation in the market place.

An example of a consumer network would be AMWAY or HERBALIFE.

Sales networks:
In this category the network is focused on sales. Their job is to get the products in front of prospective clients and to convince them to buy. Once they have created a new client, they service the client and generate ongoing sales.

Advantages:

• A new network member can generate income from day one.
• A single member can generate huge volumes without recruiting a singe new member.
• Sales can be driven through promotions and incentives.
• They usually have a great reputation due the their consultants who are militantly loyal to the brand.

Disadvantages:

• There is less emphasis on recruiting and growth is therefore slower.
• Sales volumes can dip and spike due to forces outside of your control.

A good example of a sales network would be AVON.

Obviously there are strategies that try to straddle the fence and this is where the creativity comes in. In a bid to get the best of both worlds, company owners get truly creative and in so doing, make the software developer’s life a living hell!

Driving behavior
There are three main mechanisms uses to drive behaviour:

• Compensation
• Recognition
• Incentives

Over the next few weeks I will be looking at these in turn. I will expand on them and provide you with working models of how they can be implemented.