MLM Compensation Plans - The Binary
The binary plan is the newest on the scene. In a binary plan, a distributor is allowed to occupy one or more
"business centers," each limited to two downline legs. Compensation is paid on group volume of the downline legs
rather than a percentage of sales of multiple levels of distributors. In other words, payment is volume driven rather
than level driven. Sales volume must be balanced in the two legs to be eligible for commissions, which are paid at
designated points when target levels of group sales are achieved. The distributor may occupy multiple positions
and may re-enter or loop below other two leg matrices in which he or she has been active. There is no depth limit
on payment but each matrix has a finite amount that can be paid out, thus necessitating involvement in multiple two
leg matrices. Payment in binaries is often on a weekly basis.

Proponents of binaries cite several advantages. First, they like the weekly payout. Since it is a series of two leg
matrices, it is simple to explain. Group cooperation is promoted because payout is on group volume and requires
balancing of volume in each leg to be eligible for payout. Some call it more democratic because of the limitation on
payout in each matrix, the unlimited depth of payout, and the allowance of looping or re-entry.

On the other hand, the binary is the most controversial of plans. The binary had its unfortunate origins in the early
1990s in fraudulent gold coin programs, and its use later for other questionable products did not help. Those
subsequent products were generally high-ticket one-time purchases such as consumer service or travel
memberships, travel certificates or overpriced prepaid phone cards. By the end of the 1990s, and after many legal
challenges, the binary was not in great favor, and only companies like USANA, that had applied the concept to
consumables, seemed to be around.

Critics charged that the implementation of binary plans brought on legal and business problems. Companies and
distributors tended to promote the plan rather than the product, creating accusations of a "money game." Often
plans had a one-time sale requirement which created a something-for-nothing atmosphere and appearance of
payment for headhunting recruitment. The multiple business center approach was often presented as a "purchase
of a business center," an "investment," or a "front-load" of product. The ability to stack personal business centers
also created the possibility of front-loading. The required balancing of sales volume between legs meant that hard
work might yield no payoff and income would be forfeited, because personal production did not count if balanced
sales volume did not occur. Finally, the multiple re-entry or looping created a "game-like" atmosphere in which an
individual could end up in the downline of someone he or she had sponsored. For the distributor looking long term
at a distributorship that might be sold, this "looping" also made it virtually impossible to place a value on a
distributorship because no continuous downline genealogy could exist.

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