I have been involved in this industry for more than three decades. I have analyzed a number of pay plans and have had the opportunity to watch many come and go. My greatest opportunity to understand the dynamics of pay plans came through the ½ million dollar study of the MLM industry conducted by an independent market research firm that I financed. Forty-years of MLM history were studied and more than 300 programs were examined. Genealogies containing information on more than two million networkers and customers were carefully analyzed. From this study, I learned a great deal about how pay plans affect distributors.

I had the privilege of being involved in the evolution of the 4Life^TM pay plan. In my 37 years of networking experience, I have never seen a pay plan with more thoughtful science behind it. Let us now venture into the understanding of the dynamics of compensation plans and especially the 4Life Research^TM pay plan.

From a company's perspective, the purpose of a pay plan is not simply to fairly reward you for your work or achievements. The average networker has no idea that there is a specific strategy behind the pay plan that will affect his personal potential income. Some compensation plans are designed to attract certain types of networkers. Other pay plans are designed to encourage certain types of behavior. Examples of these strategies would be: deep paying programs to attract heavier hitters, high front-end paying programs to attract more grassroots distributors and larger fast-start bonuses to encourage more sponsoring.

These strategies create mathematical boundaries that control the maximum percentage of individuals in any particular segment of marketers that can be in profit. These mathematical boundaries will influence how difficult or easy it is for each segment of marketers to earn potential incomes. When you join a company that has a compensation plan that is imbalanced away from your category, you will find it very difficult to achieve your full potential. You might say that "the cards are stacked against you." The majority of pay plans are designed to attract certain distributors and create a few big checks quickly with very little regard for how the pay plan will affect the long-range success of its participants. This reality has led to a tremendous attrition problem in our industry and to the very failure of a number of companies.

Throughout my career (1967-2004), I have observed that the majority of pay plans have been designed to attract individuals that are considered to be "heavy hitters." By heavy hitter, I mean someone with the experience to build a very large organization. The common heavy hitter has had the paradigm that the ideal strategy is to earn as much money as possible as quickly as possible at the expense of building solidly. Unfortunately, this mindset has led to massive attrition in this industry. The heavy hitter actually ends up earning less overall income as well as an unstable residual income. The heavy hitter will actually earn the greatest amount of stable residual income when all segments of distributors are fairly compensated. A wise heavy hitter will select a program that doesn't overcompensate him too quickly but spreads the income appropriately throughout all segments of marketers.

When I hear someone brag that their upline leader is earning $200,000 per month in his first year from an organization of 25,000 distributors, it saddens me. Actually, the bragging distributor is glorifying the "knife that stabbed him in the back." What this means to me is that a great number of mid-level builders and grassroots distributors are being underpaid. The paradox is that the heavy hitter's days of success are limited and failure is right around the corner. You can read my synopsis, "Science Behind an Effective Pay Plan," to enhance your understanding of the principles behind this statement.

Success has an equation of factors that determines its dynamics. When you include as many of these factors as possible into your building strategy, you maximize the degree of success that you can achieve. When you overpay the upper end of your leaders on a given volume, eventually, the underpaid segment of your organization will drop out.

This marketing philosophy and strategy has created a scenario where the majority of heavy hitters move from company to company every 6-10 years (sometimes even more quickly). Greed can be a great leader's downfall. Everyone in your organization will be more successful when each person is compensated correctly in direct relationship to his role in building and maintaining the organization.

4Life's^TM compensation plan is the most scientifically designed program that I have observed in this industry. The first phase of the 4Life^TM pay plan reflected many of the principles derived from the extensive study of the industry that I mentioned earlier. Genealogies containing information on two million people were examined. Statistics on all aspects of network marketing were compiled, including marketing trends, attrition/retention ratios, sponsoring data, the relationship between pay plans and growth, the value of various segments of distributors, the impact of various marketing strategies, product philosophies/strategies and their impact on success.

The second phase of our pay plan strategy was initiated in March 2004. This phase continued along the same basic principles that the first phase followed. The actual field experience of the first phase helped us target areas of the plan that, when refined, would perfect it. Many leaders from different segments of networking, including Dave Daughtrey (with 20+ years of experience) and myself, worked closely with David Lisonbee and company management for more than a year on the final design.

The key to our success in developing the most scientific and effective pay plan in the industry was the heart behind the minds involved. A great pay plan can only be designed by unselfish leaders that have a broad vision for lasting success. Each of us recognized the value of properly rewarding each segment fairly, appropriately and effectively. We realized that a well designed pay plan should encourage and reward the productive behavior of all of its participants. Achieving this goal would become a cornerstone to lasting success for the company and its "partners" in the field.

I identified seven categories of distributors (listed below) from the data derived from the study of the industry. These categories were targeted by the 4Life^TM pay plan.

Seven Segments of Network Marketers

Grassroots Distributor Product User: A distributor that primarily purchases the product but does not sponsor other individuals. This segment may have a few customers.

Grassroots Distributor Enroller: Generally, this distributor enrolls a few other distributors and a few customers. This individual does not demonstrate traits of a leader and doesn't experience much geometric growth in his organization.

Grassroots Distributor High Achiever: This individual, if properly motivated, can enroll a significant number of other distributors and customers. This distributor may or may not demonstrate leadership characteristics. His/her leadership skills are undeveloped but promising. Often he/she enrolls a great number of distributors but the geometric growth dead ends unless someone upline is proactively involved in training and support. A few of these individuals can reach Diamond status through high enrollments and the excitement this generates without a great deal of help from upline.

Mid-Level Leader: This individual not only can enroll other distributors but can create moderate geometric growth from his downline partners. Usually, his leadership characteristics are becoming evident. Generally, this type of leader is at a crossroads. With the right assistance, this individual can continue developing leadership skills. He/she is involved in problem solving but is somewhat a novice at it. He/she is able to identify and train other potential leaders to a degree. The average level of achievement for this segment is a Diamond with a few Diamonds or a Presidential Diamond within his group.

Upper Mid-Level Leader: This leader is able to identify potential leaders and successfully train them. He/she is able to organize conference calls and create some marketing tools and systems. Generally, he/she is charismatic and is a center of influence for other upcoming leaders. He/she is capable of public speaking. The average achievement level of this segment is a very successful Presidential Diamond or International Diamond.

Mid-Level Executive Leader or Heavy Hitter: This leader develops overall strategies for his organization and sets the pace for whatever marketing philosophy will be followed by his organization. The mid-level heavy hitter develops strategy for his group. He/she is able to garner respect and loyalty from other leaders. This leader has an overall understanding of the industry and is able to navigate his organization successfully through competitive elements that threaten his "kingdom." The heavy hitter is able to convey an image that has a magnetic effect on key pillars of his/her organization. In 4Life^TM this would be the realm of Gold Internationals. At the heavy hitter level or Gold International level, there is a wide range of talent and achievement.

Top Level Executive Leader or Heavy Hitter: He/she is everything the mid-level heavy hitter is but works harder at it or is more talented. There is a very wide range of achievement at the Gold International Diamond position (GID). The volume requirement for a GID is only $250,000 per month. A few of us at this level have several million dollars in volume each month.

The boundaries between these segments are not precise. With teamwork and successful interaction with the right upline, each of these categories can achieve far beyond their potential or experience.

(Footnote: In order to broaden your understanding of the relevance of 4Life's^TM pay plan, I suggest that you read "Cold Facts Exposed" and "Science Behind an Effective Pay Plan, A Philosophical and Historical Perspective of Compensation Strategy." Also, be sure to examine the "Survey of the Top 30 Network Marketing Companies in the World." In this survey, 4Life^TM was found to pay at least $15 million more in compensation on every $100 million in volume than the average rate paid by the other 30 companies. This is remarkable when you consider that 4Life^TM invests a greater percentage of its revenue into product research and development than the great majority of other network marketing companies.)

Keep in mind that compensation strategy is only one factor in the equation for success. The paradigm of the corporate leaders, marketing philosophy followed, and the company's product strategy are equally important. Also, support philosophy and strategy are paramount to success.

Let me introduce you to the science behind, what I believe is, the best pay plan in the industry.

"Understanding the 4Life^TM Pay Plan & the Science Behind It"

Terms and Definitions

Seamless Pay Plan: The 4Life^TM pay plan is seamless internationally. This means that we have the same pay plan throughout the world. You only need to enroll in one country to receive bonuses on all distributors in your organization throughout the world. All commissions are based on the first 100LP of the distributors in their pay grid.

LP or Life Points: This refers to the credit you are given for a product purchase. A bonus is paid on the LP and not the wholesale purchase price. The purpose for LP (some companies call it CV, BV, PV, etc.) is to compensate for the difference in profit for each product. The cost of raw materials, research, competition or other manufacturing factors will cause the profit in different products to vary. Instead of having a different bonus scale for each product, it is more efficient to assign a different credit value to each product. In comparing pay plans, it is important to compare the actual credit value of the primary products promoted by each company.

The following example illustrates the relevance of the credit value assigned to each product:

Company A: Cost of product: $100. Credit value of the product: $75. Bonus paid: 30%.

30% x $75 = $22.50 bonus amount

Company B: Cost of product: $100. Credit value of the product: $93. Bonus paid: 25%.

25% x $93 = $23.25 bonus amount

As you can see, even though Company A paid a 30% bonus, it actually paid less cash to the distributor on the same wholesale price.

GLP: The total group LP volume within the individual's first three levels. (No compression.)

Organizational Volume: The total group volume within the distributors total organization.

Autoship: The distributor sets up a bank draft or credit card draft for a particular order on a particular date each month.

Back-Up Autoship: The distributor sets up a back-up bank draft or a credit card draft for a particular order that will only be activated if the individual does not place an order before that date.

Personally Enrolled: The individual that actually enrolls the new distributor is considered the enroller.

Personal Volume Requirements: The LP purchase or retail sale that is required of each distributor in order for that distributor to qualify for a particular achievement position.

Sponsor: The individual directly above the distributor. The enroller and sponsor can be different people.

Volume Rebate: After a distributor's first purchase, the distributor can receive a 25% rebate on purchases over 100LP. The distributor must be at least at a Leader 4Life level. The key to helping individuals at this level is to make sure they have a clear understanding of the products, and keep reinforcing their belief in the product through the sharing of research and testimonies. Also, conveying a sense of value (their value to you) and appreciation is important.

Power Bonus Pool: Three percent of 4Life's^TM International sales is divided into a 2% cash bonus pool and 1% into a luxurious travel program. The cash pool is divided into shares. When a distributor enrolls three new distributors that purchase at least 100LP in product within a single month, and these distributors reorder in the second month at least 100LP in product, the enroller earns a share of the International Power Pool Bonus. Multiple shares can be earned with a $1,000 cap. One percent of the pool will be used to finance the "The Great Escape." Each month, from a random drawing, 4LifeTM distributors are awarded this dream vacation for two. Distributors qualifying for this Power Pool will receive one drawing ticket for each new distributor brought in with at least 100LP and two tickets for each distributor that joins with at least 400LP. In order for the enroller to earn his shares, the new distributors must submit to 4Life a completed application and a W-9 or W-8 form.

Premier Bonus Pool: The Premier Pool represents two percent of 4Life's^TM monthly LP. International Diamonds and above qualify for this bonus. One-half of the amount paid through the bonus pool is paid on a pro rata basis based on shares earned. Each month that a distributor qualifies as an International Diamond, one share is earned. Each month that a distributor qualifies as a Gold International Diamond, two shares are earned. The remaining half is paid on a pro rata basis monthly based on the volume upon which the individual is paid.

Customer: A consumer that purchases 4Life^TM products that is not registered as a distributor. An ordinary customer will purchase product from a 4Life^TM distributor at a retail price.

Preferred Customer: A preferred customer (PC) receives a special customer ID# and orders directly from 4Life^TM. The 4Life^TM distributor who enrolled the preferred customer receives credit for the PC's purchases.

Pass-Through: A bonus paid to a 4Life^TM Distributor for which another in the downline has not qualified to receive.
 

Infinity Bonuses: Diamond positions and above earn Infinity Bonuses. The definition of “infinity” is “an indefinitely large number.” The definition of “indefinite” is “Lacking precise limits.” The depth of an Infinity Bonus is determined by components of each individual’s downline organization.

You always continue earning a infinity bonus until someone under you begins earning that bonus. Generally, you are paid down through the 3rd level of the blocking distributor.

You start earning an infinity bonus on the level that you qualify for it which is the 4th level.

There are single level Infinity bonuses and Group Infinity Bonuses. The Diamond Infinity Bonus is 6% on each individual from your forth level down until you are blocked by another Diamond or higher pin level position. The singlelevel Presidential Diamond Infinity Bonus begins on the 4th level and continues until blocked by a equal of higher level pin level position.

For a Diamond and above the 4th level is a guaranteed infinity bonus. Being guaranteed means that your 4th level bonus cannot be blocked.

A Group Infinity Bonus is paid on a downline leader’s complete organization down through the 3rd level of the blocking distributor.

The Rewards and Achievement Levels of the 4Life^TM Pay Plan

The Science Behind Each Component

Grassroots Distributor Category: Your future organization will consist of 75-80% grassroots distributors and customers. The grassroots category is a very important factor in your future success. It is very important that a compensation plan address the needs of this category. The majority of pay plans in this industry do not effectively address the needs of this category. The result is massive attrition.

As a side note concerning the grassroots segment of our industry, I would like to say that we should not look at this category as a failure group. I have observed that a number of leaders in the MLM industry promote the perspective that people who don't excel in network marketing are failures because of personal weaknesses. This view is counter-productive. The segment makes up 80% of the industry. A number of these people have different goals, time considerations, and different value priorities, and should not be perceived as failures. Making this segment feel like they are perceived as such increases attrition in their ranks. We should convey true appreciation and value to the people that create 80% of our income. Twenty to thirty percent of the grassroots distributors are capable of moving into the mid-level leadership category with the proper encouragement and training. The primary product user category will always stay between 75% and 90% regardless of how many individuals move up into the leadership category. This is a mathematical certainty due to geometric constants that set these boundaries in every pay plan (refer to "Science Behind an Effective Pay Plan").

Common short-term causes of attrition are empty promotions, hype, motivation and blaming the grassroots distributor for not doing what it takes. The cornerstone of retention at the grassroots level is a unique and effective product. In my 37+ years in nutrition and network marketing, I have never experienced a product that comes close to Transfer Factor^TM in that area. In addition, 4Life Research^TM has effectively addressed the needs for this category with the following Life Reward features: Preferred Customer, Associate Position, Leader Position, Leader 4Life Position and the Power Bonus Pool.

Preferred Customer: The Preferred Customer position is very important to the grassroots distributor. This customer registers with 4Life Research^TM and can order products directly from 4Life^TM at the wholesale price. 4Life^TM will ship products directly to the Preferred Customer. A Leader 4Life will be paid 25% on the LP of all products ordered by the Preferred Customers. All Preferred Customers must be placed on the first level of their sponsoring distributor. Commissions are paid upline in the same way the Rapid Reward is paid.

Basic Grassroots Distributor Positions: This segment consists of individuals that may sponsor a few distributors or have a few customers. Generally, distributors at this level desire to break even on their product purchases or to supplement their income by a few hundred dollars. 4Life^TM has provided four features for this segment.

Associate Position: There are two requirements for achieving the Associate position.

1. Purchase at least 50LP per month.
2. Purchase a distributor kit.

Rewards:

1. A bonus of 2% on all first level distributors
2. A bonus of 15% on all on second level distributors
3. A bonus of 15% on all Preferred Customers
4. Participation in the Power Pool of 3% of the International sales volume

Leader Position: There are four requirements for reaching the Leader position.

1. Purchase 100LP in product each month.
2. Set up either an autoship or back-up autoship for at least 100LP.
3. Enroll four distributors that purchase 100LP per month. At least two of these distributors need to be on your first level.
4. Purchase a distributor kit.

   *There are no time limits for reaching the Leader position.

Rewards:

1. Volume purchase rebate - 4Life^TM will pay you a bonus of 25% on all LP above your monthly purchase of 100LP.
2. A bonus of 25% on all of your Preferred Customers' purchases
3. A Rapid reward bonus of 25% on all of the first purchases of new distributors enrolled by you
4. A bonus of 2% on all first level distributors
5. A 25% bonus on all second level distributors
6. A 5% bonus on all third level distributors' customers
7. The privilege of participating in the Power Pool Bonus

Leader 4Life: The Leader 4Life position has the following requirements.

1. Purchase 100LP in product each month.
2. Set up either an autoship or back-up autoship of 100LP.
3. Purchase a distributor kit.

(These requirements must be fulfilled at the time of enrollment. A Leader4Life does not have to personally enroll a certain number of distributors for qualification.)

Rewards:

1. Volume purchase rebate - 4Life^TM will pay you a bonus of 25% all LP above your monthly purchase of 100LP.
2. A bonus of 25% on all of the purchases by your Preferred Customers
3. A Rapid reward bonus of 25% on all of the first purchases of new distributors enrolled by you
4. A bonus of 2% on all first level distributors
5. A 25% bonus on all second level distributors
6. A 5% bonus on all third level distributors' customers
7. The privilege of participating in the Power Pool Bonus

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