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 ˝ 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 4LifeTM 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 ResearchTM
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.
compensation plan is the most scientifically designed program that I have
observed in this industry. The first phase of the 4LifeTM
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
4LifeTM pay plan.
Seven Segments of Network Marketers
Product User: A distributor that primarily purchases the product but does
not sponsor other individuals. This segment may have a few customers.
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
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 4LifeTM
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
(Footnote: In order to
broaden your understanding of the relevance of 4Life'sTM
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, 4LifeTM
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 4LifeTM
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 4LifeTM
Pay Plan & the Science Behind It"
Terms and Definitions
Seamless Pay Plan: The
4LifeTM 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
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
Company B: Cost of
product: $100. Credit value of the product: $93. Bonus paid: 25%.
25% x $93 = $23.25 bonus
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.)
The total group volume within the distributors total organization.
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.
The individual that actually enrolls the new distributor is considered the
Requirements: The LP purchase or retail sale that is required of each
distributor in order for that distributor to qualify for a particular
Sponsor: The individual
directly above the distributor. The enroller and sponsor can be different
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'sTM 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'sTM
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 4LifeTM products that is not
registered as a distributor. An ordinary customer will purchase product from a
4LifeTM distributor at a retail price.
Preferred Customer: A
preferred customer (PC) receives a special customer ID# and orders directly from
4LifeTM. The 4LifeTM
distributor who enrolled the preferred customer receives credit for the PC's
Pass-Through: A bonus
paid to a 4LifeTM Distributor for which another
in the downline has not qualified to receive.
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
Rewards and Achievement Levels of the 4LifeTM
Science Behind Each Component
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 FactorTM in that area. In addition,
4Life ResearchTM 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 ResearchTM
and can order products directly from 4LifeTM at
the wholesale price. 4LifeTM 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.
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. 4LifeTM has
provided four features for this segment.
There are two requirements for achieving the Associate
- Purchase at least 50LP per month.
- Purchase a distributor kit.
- A bonus of 2% on all first level distributors
- A bonus of 15% on all on second level distributors
- A bonus of 15% on all Preferred Customers
- Participation in the Power Pool of 3% of the
International sales volume
There are four requirements for reaching the
- Purchase 100LP in product each month.
- Set up either an autoship or back-up
autoship for at least 100LP.
- Enroll four distributors that purchase
100LP per month. At least two of these distributors need to be on your first
- Purchase a
*There are no time
limits for reaching the Leader position.
- Volume purchase rebate - 4LifeTM
will pay you a bonus of 25% on all LP above your monthly purchase of 100LP.
- A bonus of 25% on all of your Preferred Customers'
- A Rapid reward bonus of 25% on all of the first purchases
of new distributors enrolled by you
- A bonus of 2% on all first level distributors
- A 25% bonus on all second level distributors
- A 5% bonus on all third level distributors'
- The privilege of participating in the Power Pool Bonus
Leader 4Life: The
Leader 4Life position has the following requirements.
- Purchase 100LP in product each month.
- Set up either an autoship or back-up
autoship of 100LP.
- 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.)
- Volume purchase rebate - 4LifeTM
will pay you a bonus of 25% all LP above your monthly purchase of 100LP.
- A bonus of 25% on all of the
purchases by your Preferred Customers
- A Rapid reward bonus of 25% on all of the
first purchases of new distributors enrolled by you
- A bonus of 2% on all first level
- A 25% bonus on all second level
- A 5% bonus on all third level
- The privilege of participating in the
Power Pool Bonus
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