Network marketing is an interesting industry in many ways. One of them is the network marketing compensation plan, or how do I make money in short. Pretty important you would think. Yet many people do not really understand how theirs works and in many ways it is irrelevant because very few people ever earn their way all the way through to the end.

So here goes. By the time you finish reading this article on network marketing compensation plans you may even be understand yours. Here are the disadvantages and advantages of four main network marketing compensation plans.

1.Aussie 2-UP. I’m not sure where the word “aussie” comes from, as this doesn’t really have anything to do with Australia. Anyway, in this plan, you would give the first two people you sponsor to your upline. Everyone else you get to keep. The advantage of this type of plan? Hmmmm, let’s see. Zero!

Since the industry standard is that most people only sponsor just 2.7 people in their network marketing company, can you imagine having to give them away right from the start?! Ouch! Now, if you are a hard-hitting, sponsor monster who loves to sell big ticket items as promoted by many aussie 2-ups, this is the plan for you. For the rest of us, this just doesn’t work.

Keep in mind as well that with aussie 2-ups, there really is no residual income. The day you stop selling is the day your income stops. So, carefully evaluate if this is the type of plan you want to commit to.

2. Stair step breakaway. The advantage of this compensation plan is that you can go as wide as you want. If you have 50 people, everyone can be placed on your front line. If you have 5 out of the 50 people who are doing well and want to really build, you can build 5 legs underneath them and not really worry about what everyone else is doing.

The disadvantage of this plan is that if you place a heavy hitter under a dud, you won’t qualify for your company’s bonuses and commissions. Also, the fact that there is a break away component isn’t good. For example, if you have 5 legs with 10,000 worth of volume in each leg, when your downline reaches a particular volume, they can break away. Sometimes, this can be as much as 10-12% of your volume. Other times it can mean losing all the volume. This is not a pretty picture is it?

3. Binary. This plan promotes two legs. The advantage with this network marketing compensation plan is that it pays on volume and you can build the two legs as long as you want. The disadvantage is that you have to balance both legs and the pay is based on the legs being balanced.

I know you have probably heard people bragging about having thousands of people in their downline with this plan. What they don’t tell you is that they are barely making any money because all the people are in the strong leg. They also don’t tell you they are struggling to build since they can barely get the weak leg moving. Unbalanced legs equals no money! Keep this in m ind when you look at a binary MLM compensation plan.

4. Matrix. Matrix’s can be 3×5’s, 5×7’s, 3×9’s, etc. For example, if you are in a 3×5 matrix, you can have 3 people on your frontline and can go 5 levels deep. Many times with a matrix, there will be a lot of talk about “spillover” which sounds wonderful to many people.

All the “spillover” talk leads right into the disadvantage of a matrix. You see, all the the “spillover” mumbo jumbo really promotes a welfare mentality. People think they won’t have to do any work. As professional network marketers, we know this is not the case! It’s not a “sit back and let all the people come sailing in” type of business. You have to build relationships and talk to people.

Another disadvantage of a matrix is that you have to guard your front line posistions very carefully. These posistions are really like gold. If you upline sponsor puts a dud in your frontline due to “spillover” and wants you to build for them because you are an awesome builder, you’re toast! Make sure nobody ever does this to you.

Also, it’s very likely that you will be able to build deeper than 5 levels. Unfortunately, with a marix, you won’t get paid on volume for the levels that go below our example of 5. This is not a good thing at all!

I want to quickly mention one other thing. My Power Mall offers a unique compensation plan that is a matrix plan. It pays a commission on rebates earned when you shop. Because it is neither an mlm business, nor an affiliate program, it is not a true matrix. You have no limitation on how wide you build it and it pays up to 9 levels deep. When you do the math on a 10 X 9 matrix you will see how big your matrix can be.

So there you have it. Which kind of a network marketing compensation plan does your company have? Good luck in understanding it and using it to it’s fullest to make the most money you can possibley earn in network marketing