General

MLM Pay Plans: Confusing on purpose?

Does anyone in MLM understand how they get paid?

Companies have needlessly confusing pay plans, and sometimes plainly misleading ones. Is yours one of them?

Consider companies with one of those PV/BV/Points pay plans, one of my favorite candidates for the MLM trash bin.

The PV/BV/Points assigned to products of this type of company is always significantly less than the selling price for those products. 25-50% less is common.

Lulu’s company has such a plan. Her sponsor told her (before Lulu had signed up) that the company pays 30% for product sales. All the recruiters talked about 30%. Lulu liked that and signed up.

However when she got her first check, she didn’t get 30% of her sales. Instead:

Lulu sold $100 worth of product, but only got 30% of
70. (!) Because, 70 is the BV/PV/Points assigned to the product she sold. So even though she gave the company $100, she got paid on $70. So instead of the expected $30, she got only $21.

“Oh,” said her sponsor, “the pay plan is complex, you know.”

Indeed.

Challenge to company brass (shall I call you by name?): Why not just make it one-for-one? The point/BV/PV-type system is a needless way to complicate things. And it makes your company look deceptive – like you pretend to pay better than you actually do. Doesn’t it?

The “We pay 30%” brings in reps to look, though. And then they get a well-rehearsed pitch about everything else that’s wonderful about the company. Soon some people forget the pay discrepancy and sign up anyway.

My dark side can’t help but wonder, was that the idea?

There are lots of companies and people hiding things like this. But we cannot hide these things anymore. See here.

Results so far here.

What are your confusing pay plan stories?

P.S. Yes, I know that the pay scale goes up as people reach higher levels. That’s not a problem. Common in sales. I am talking about the percents used to advertise to others what is being paid, e.g. “We pay 30% for product sales!” when in fact they pay on points, etc., which is always much less.

About the author

Kim Klaver

16 Comments

  • My company pays a percentage of the dollar value for products sales. Points are approx 1=$2 and are used for the purposes of achieving rank promotion, calculation of other bonuses and dictating minimum monthly spend i.e. 50PV.

    1 Point = $1 would be easier to understand, however companies couldn’t place higher purchasing value on certain products e.g. Berry Radical Antioxidant versus a deodorant.

    kristine.mionegroup.com

  • It really doesn’t matter whether it is a BV/PV plan or it is a straight retail plan…The company still pays out the same amount of money.

    The reason the company does a BV/PV plan is to keep things consistent throughout the world in other countries…at least that is why I think they keep it a point plan.

    For instance…in my company each product has a retail price and a certain number of points associated with it. The number of points associated with it is what the company pays out to the field.

    If you are a numbers person and like to look at and analyze numbers…the numbers for our company look like this…An autoship of 100 points costs $180…so translation…for approximately every $180 that is moved through the organization or the customer base, our company pays out $100 to the field of distributors and keeps $80 for themselves….So on average we pay out 55% to the field…and depending on where you are at in the plan, depends on how much of that 100 points you receive.

    Now this is on typical autoships, but for individual products the company pays out more and less for certain things they market due to the difference in costs associated with the creation of everything.

    This may be confusing to some, but it is simple when showing people reality.

    Now maybe companies don’t show reality because they don’t want to turn people out of the door. Which I can see what you are saying Kim.

    Maybe instead of blaming companies, we should be asking…

    *Why are people so naive when joining companies, and don’t do their homework?

    *Why aren’t they asking the question…30% of the retail price, or of the points that the company pays out on individual product orders?

    *How can we better communicate this fact to prospects about how our company pays instead of saying “Things are too complex?…Just to get them in”

    As someone who believes in personal self responsibility and self accountability, naturally I would shift the blame on the people who decide to join, rather than the companies sharing the information…No matter what company you join, you should do your homework.

    Taking this principle to heart, it took me 9 months to join the company I am with, and after joining I knew I could feel comfortable here because I knew what I was getting myself into after doing my due dilligence.

    Agree…Disagree…Thoughts?

    Scott (From Boston)

  • The issue of the points and your survey question are two totally different things.

    One reason for points is to make it uniform, across the board. For example, my company is in about 40 different countries. When explaining the plan to people in other countries, I want to be able to have an explanation that makes sense to all.

    Instead of saying “In Canada you get this percentage and in the UK you get this percentage and in Sweden you get this percentage and…” you get the idea. THAT would be complicated.

    Example:

    US – $75.00 = 50 BP
    UK – 50.9 EUR = 50 BP
    Sweden – 479.8 KRONA = 50 BP

    I don’t want to do this for each of the 40 countries we are in and convert to their currency to explain our comp plan. Then I would have to remember a lot of different percentages and exchange rates and autoships. 40% of 50BP will ALWAYS be the same across the countries.

    In order for someone to qualify for commissions, they don’t need to be on autoship, but do need to generate at least 50 BP (either them or their customers), which is a different amount of dollars than Euros than Kronas than Canadian Dollars, etc… To qualify for sponsoring bonuses, they need to have a 100 BP autoship, so I would need to convert the 100 BP autoship to each different amount in each different country when I talk to people. THAT is too complicated for me.

    If your company is just in the US, and never plans on expanding (I would certainly not join THAT mlm) then they can use a % of dollars.

    The problem is with reps who do not make it clear that the pay is on BP not dollars, Euros, Kronas, etc… I know my company makes it very clear that the percentage is on BP. I make it very clear when I’m explaining the plan to somone.

    Now for your survey question – YES – most companies do make the comp plan complicated so that no one will understand it. If they actually told people the hoops they had to jump through and legs they had to balance and such, very few would ever join. I talked to one person recently who isn’t getting paid on hardly any of the volume SHE BROUGHT IN in one leg because her other legs are “dead”. So if she doesn’t balance that leg out, she’s out of luck on all that commission, even though the volume is being done by one of HER recruits. That’s sad. Apparently people run into these “runaway legs” (as they call them) all the time. You should get paid on any volume you bring in. You shouldn’t have to have other legs to offset that volume.

    That’s just one example. There are companies out there that hide things like this in their policies – If you don’t have at least one NEW sale to at least 3 DIFFERENT customers or new affiliates in a month, you don’t qualify for commissions. How many people would join those companies if they knew that up front?

    This is exactly why the attrition rate is so high. And it’s not a matter of “just be honest” because most reps don’t even know these things until AFTER they start building. Then they are totally discouraged because they realize they aren’t getting paid on what they’ve done because the forgot or didn’t know about hoop #12 and then they realize if new people know about the hoops, they won’t start, so they just continue explaining it as they have always done and let new people find out for themselves when the time comes.

    It’s all very sad.

    ~Roxanne~

  • I am a distributor for an MLM that using a BV and PV system. I believe they use these systems correctly. In the USA the BV and PV are the same. In effect commissions are paid on the retail value of the products sold. The only time the difference comes into play, is when its a sale in a foreign country. In those countries the BV and the PV are the same but the values are based on the exchange rate. This allows all distributors no matter want country they are in to use the same promotionally material and the same numerical explaination of the compensation plan. In the USA one BV/PV equals $1 and in a foreign country the BV/PV equals an amount equal to the exchange rate for that country. With one accounting location (USA) and the ability to sell and sponsor thounght out the world, this system works well. Whatever the distributors commission level is 20%, 25%, 30%, 35%, or 40%, that is the commission paid on the sale price, and that’s the way any ethical MLM should be.

  • I confess that ours changes so often, I cannot keep up. To prevent getting negative and pessimistic, I tell myself not to worry about understanding it, but just to sell a lot and I’ll get paid a lot.

    That little self-talk was not so easy when I signed up years ago, though. I had been told I’d get about $100 in advanced commission per sale. What I was NOT told was that I would not get a penny of it until I’d made my FIFTH sale, and would not get the full $100 per if I did not make all of them within 45 days of signing up.

    HOWEVER, my Mississippi legal license–the one without which I could not sell a thing at the time with Pre-Paid Legal–did not arrive until a full six weeks AFTER I’d signed up. This meant I legally had to sit on my hands until I got it, and then had about three days to make those requisite five sales before deadline. I made only one sale, so I got zip. Since I was really counting on that $100 commission from my one measly sale to offset my start-up expenses, I washed out within two months of signing up, mad as a wet hen at my sponsor for outright lying to me. I felt like I’d been had. It took me some time to sort out what happened, regroup, and plan better for the next time. Regardless of the confusion, I knew I was in the right company. I had a great product/service, empowering “the little guy” with legal assistance he/she otherwise could not afford. Getting beyond the intricacies of the pay plan with new recruits–now that’s still a problem for me. I feel really stupid and ashamed that I don’t understand it.

    I won’t even get started on charge-backs for lapsed polices–the long-time bane of associates of all types of insurance. I keep saying I’m going to go “as-earned” only to avoid charge-backs, and that would be best. However, it’s discouraging and de-motivating to see that little $8-$15 per in my account, knowing I also won’t get a check until it grows a bit more.

    How this has affected my recruiting is that I mainly recruit in states that require no legal license to sell. Online makes this much easier! Those folks can sell IMMEDIATELY in the flush of new business fervor. Not one to mislead as I was misled about the pay plan, I’m tired of the glazed look on local recruits’ faces (or hear that long silence from recruits in other licensed states) when I try to explain the hoops they may have to jump through to get paid. It shouldn’t be this way. Okay, now I feel like a tattle-tale. Argh! We’re not SUPPOSED to talk about these things. We’re being small-minded and negative!

  • My take:

    Most comp plans will be difficult to understand because they represent a completely different way of getting paid.

    We are used to thinking linearly. By nature, compensation plans are non-linear.

    So, it takes some time to really understand what is going on.

    With that said, some companies (or individual distributors) take advantage of that and either state or imply things that give the wrong impression about the compensation plan.

    For example, “We pay on infinity.” (What you’re not told: “But only if you balance your other leg to infinity”).

    I don’t really have an opinion about points versus dollars, as long as it is made clear what you are paid on.

    I think the point system can be useful if it represents the total payout to distributors (i.e., a $100 order might have 40 points, because $40 gets paid out to the comp plan).

    Walter Reade (from Wisconsin)

  • People the past couple of posts have been written from the cup is half empty instead of half full. The pay plans are only as confusing as you make them. Have you taken a look at your health insurance policy lately to see what is covered and what is not and who is covered etc. You want to burn an industry, I suggest you start with the health insurers or mortgage companies for that fact.
    As a distributor it is your responsibiility to get the facts regarding your comp plan so as to explain it to a potential business partner. How else can you show them how they make their money. At first glance my comp plan would look confusing, however when you put it on a template both for customer sales and business building it clearly defines what is required for monthly volume vs. commission payout, and clearly shows how many levels deep etc. Now I can see how that would be confusing for the companies that have a Pv/BV system, however our company has a payout on products dollar for dollar ( PV/PV) as a matter of conversation, several of our services are actually rounded up to the next dollar for PV, example $9.99 equals 10PV. I think this is quite fair of our company. Our customers even get a percentage of their purchase volume on our autoship, dollar for dollar up to a certain dollar amount monthly, when they spend $50.00 in product monthly they will receive 20% in reward credits to purchase any product of their choosing therefore, for a $50.00 purchase they will accumulate 10 points/$10.00 for the first year and starting the second year they will receive a 30% automatic rewards credits.This is for all on autoship, customers and distributors as well. I personally have had upwards of $900.00 worth of points and use them for party gifts,holiday gifts and of course if I want to offer a sample. Presently I sit with $350 in points and just used most for holiday gifts, a great way to introduce my products. Should anyone have any confusion with our comp plan the corporate office is willing to explain should the field rep’s fail at the task. I love this column and the NMC community but I have to tell you that this industry bashing is getting a little old. How about a column on training, phone techniques, inviting, prospecting ideas, I know it would cut into the profits of Kims courses, but maybe not, as I personally need something in my hands to tangibly refer back to, how about it.
    Could we please start the new year with a positive spin on our industry, which when presented properly and conducted with ethics is the greatest show on earth.
    http://www.barbara.foyah.com

  • Knowledge and information is never a disadvantage!

    Most people run off emotions. Face it we are all emotional creatures and people get recruited for the strangest reasons. Some people sign up in MLM out of sympathy for the sales person.

    One question. If you are in a network marketing company right now I want you to ask yourself this. Why am I doing this? If your doing it strictly for the product then it shouldn’t bother you how much you get paid.

    If your in your company to make money then you better take a step back and look at the entire picture. If your in a binary (pv/bv/points) you better run like hell because your waisting your time.

    Not all companies and marketing plans are created equal. If your with your company to make money then you better do your homework. What makes your marketing plan or company the best? and compared to what?

    If you were going to buy a restaurant you would look at the location, track record, book keeping, over head, customer retention, product. You will want to know everything that restaurant has done for the last 5 to 10 years.

    Network Marketing is no different. You better study your pay plan as if your about to spend a million dollars for your distributor ID. I encourage everyone to do their homework. Don’t get confused with a point system.

    Find a marketing plan with 1 product, unilevel pay, at least 9 levels, global pool, seemless global pay structure, powerstart features, 50/50 split, no “pay up to” or “pay as much as”. The best pay plan is one with dynamic compression.

    Most companies have breakage. When you don’t qualify for a commission the company will keep it. Find a company such as (XANGO) that is 1 of only a few companies with dynamic compression. When someone doesn’t qualify for the commission the computer searches upline for the next person who does qualify.

    Find a marketing plan that is simple and easy to operate in. A plan that you can write out within 5 minutes on a napkin. A pay plan were you can tell someone over the phone how much they will make once they have a certain amount of people in their group.

    Find a product that is exclusive to only you. Nothing commodity like. You don’t want your customers running down to their local department store buying the same thing. Find a produt of value, that is of low ticket price, that has a tremendous amount of appeal to kids, adults, and seniors.

    Have any questions feel free to email me at easy_100k@yahoo.com

    Good Luck,
    Sean Daniels
    http://www.achievelife101.com

  • I’m more confused about PV -BV and other pay plans than I was before. Lucky for me I don’t have a plan like these and don’t care to see other company’s comp plans. It really means nothing to me to know everything about every company. I don’t know everything about what my husband does with his racing newspaper and it hasn’t hurt me.

    Best to everyone
    Robin
    Damage Control Consultant

  • Anonymous,

    Kim has asked a few times over the past few months for just the type of positive things you suggest. However, not many respond to that type of post. For example, read the post just before this one and the comments. Only three people actually answered the post.

    Seems people like the type of post that this one is because this is what gets the large response.

    When Kim tries to post positive things and have people chime in with suggestions, very few answer.

    Gotta go with what gets the response. 🙂 I would suggest that if you want more of the postive helping posts, COMMENT on those.

    ~Roxanne~

  • Reading about all the comments on the confusing pay plans out there, I am so glad ours is very straight forward. I would imagine if you are looking at a job you ask exactly what you will be paid. It is amazing that people join MLM’s without understanding what they will be paid. If the pay plan is confusing just remember that the company wants to keep the money and not pay you. If your sponsor cannot explain the comp plan to you, I say RUN, don’t even waste your time. Find the RIGHT company. I did!
    http://www.capitalareawellness.com

  • Here’s my take on the PV/BV:

    Although I’m totally against it, I believe the companies that set the pv/bv on each product they sell so that they can put more emphasis on the major products they want to sell. For example, if red widget is their flagship product, they would make it a 1 pv = $1 and then pay a 30% commission on top of that. Whereas blue widget is a another product they carry, but only give it 1 pv = $0.75 because it might be a product that they sell like hotcakes, but instead the company prefers to keep more of the profits and pay the seller 30% of the $0.75 instead of 30% of $1. Some products have a 1 pv = $0.60 or so, so it depends on who made the products.

    If the company has exclusively manufactured the products, the dollar/pv ratio will be higher. If they carry a product manufactured by another company, the dollar/pv ratio will be much smaller.

    I’m glad we don’t do that in the company I’m in. We don’t need to use this pv/bv thing. We just keep the pricing and the payout simpler. If the product is $19.95 and we get paid 30% commission for selling it, we simply get paid $5.99 for it. If it’s $29.95 and we’re paid 15% commission, we simply get paid $4.49 for it.

    The bottom line is, make sure you understand how you’re going to be paid out. If you need to make $300 a month, make sure when you compute how many of these widgets you’re going to sell, account for the pv/bv factor. That’s all I can say.

    My two cents…

    Sidney

    http://www.e-dental-plus.com

  • Throughout the last year of reading this blog the most confusing part to me has been how people ‘think’ they get paid. I dropped out of my first company because of the BPs/PVs, full circles, half circles, ifs, ands and buts.

    I like the ‘risidual’ philosophy of MLM and prefer to find ‘wholesale’ customers rather than sell retail. Another point of deception, I think, is when the company points out “how much you make ‘retailing’ the product.” As far as I’m concerned the ‘retail’ part is how much income I am generating for the company, not how much the company is ‘paying’ me to promote their products.

    My company is simple. We are paid 5$-8%-13%-18% of the retail value of the product. For example, as a newbie, if I purchase $100 wholesale from my company, the retail value is $143. I will be paid 5% of $143. As my customer group volume grows, so does my percentage. Whether I sell a bottle of AV juice or a handcreme, it’s the same.

    FLP is in 110 countries, and it’s the same in all countries. Everybody in the world gets paid a bonus on the retail value of the products.

    FLP has what they call CCs (case credits). This is their form of being fair across the globe with respect to moving up. The price of the product(s) is different in each country. Again, though, everywhere in the world 1cc=xx Currency and is consistent with the price of the product in the respective country.

    I have found that the clearest way to see how much the company pays you vs how much income you generate for the company is with Kim’s formula in 100 Customers… Figure out (without downline without retail) how much money the company would pay you if you had 100 customers who purchased $100 of product each month. That simple formula is an eyeopener.

    Venetta
    http://www.venetta.myflpbiz.com

  • I am also a distributor af Forever (FLP) I just live in Denmark. We also get paid a bonus on the products we use for ourself and that is also on the retail value. So if I purchase $100 wholesale from the company and use it myself, I will still get paid 8% of $143. And the bonus is always on time, the 15. in every month.
    I really love this company and it products

    Linda
    ln@flp.dk

  • Yeah,

    that’s one of my biggest
    dissapointments in that industry.
    Even my company does that.

    That and ‘withholding’ commissions
    until so and so many are sold or
    recruited… what a raquet.

    Then the pitch that Warren BUffet
    bought Pampered CHefs and Kiyosaki
    and Trump recommend NM if they had
    to start over….

    Wonder what they’re incentive is
    for that? I mean how would they
    feel if they had no list to market
    to etc. Sure they’ve got more money
    but that doesn’t mean their advice
    applies to me.

    Can someone mention ONE company
    that has no BV/PV bs?

    I just sell my products retail
    and buy on my left and right
    side laternatively so It pays
    me an extra 4%… pays for my
    overhead in shipping, inventory
    and postage.

    yves
    http://www.Sleepstamina.com

  • I don’t think the plans are made confusing on purpose, although the money that can be made can be misleading.

    Like others have said there is some complicating factors such currency differences. Also some products are likely to have different percentages of wholesale to retail price.

    Also the plans need to be structured in way to evenly compensate the hobby reps and the big business builders. The plans %’s might need to change over time as the makeup of the sponser tree changes over time.

    The most important thing is that the company is open and upfront about the compensation plan. My company, while having the PV/BV/GV, has regular conference calls on the comp plan and has invited members to join in on a review of the plan.

    Dan
    ONE Group rep

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