MLM Comp Plans - Why MLM Companies Love The Matrix

In my previous post, "What Is Breakage In A MLM Comp Plan?" I explained what breakage is and how companies use it to pay reps less than what they claim … often a lot less. Now let's take a look at the Matrix compensation plan to see why it is so popular with some companies.

Here are the basics of a matrix.

Let’s say you’re in a company with a 3 x 5 matrix comp plan. In this plan you have 3 recruits on the 1st level, 9 on the 2nd level, and so on down 5 levels. A 3 x 5 matrix pay-line is complete at rep number 363.

Here's why network marketing companies love matrix type plans.

• They're easily understood so lots of people join.
• "Big money" claims attract new prspects regularly.
• "Spill-over" appeals to impulse buyers.
• 90% of network marketers are blue personality types, so the matrix plan plays well to a huge number of prospects.
• Reps who receive "spilled positions" are paid fewer recruiting bonuses on a full matrix.
• Drop out rates are high, so fewer residual income is paid out.
• Earnings "outside the pay-line" go to the company, so residual earnings are limited.
• Though some matrix plans offer unlimited one-time bonuses for sponsoring outside the pay-line, very few reps ever earn them because most reps sponsor an average of 2.7 people in their network marketing career.
• Since a matrix can have any number of "first level positions" and "levels of depth" the company can determine if they want to attract mostly recruiters, or average networkers.

MLM companies like the matrix comp plan because there are many structural variables they can use to their advantage. Pay out caps and the ability to choose to attract sponsor monsters or average Joes are just a couple things in the company's favor.

The built in income limits of a matrix attracts fewer networkers capable of building stable team growth. Most of the folks who join a company with this type of comp plan never do anything with it because they expect spill-over to do the work for them.

If you are a sponsor monster, then a matrix comp plan is perfect for you. However, if you are like the vast majority of networkers who want to build a team with real residual income potential, then you might want to keep looking.

I appreciate you,

Bill Tessore