Incentives and Rewards
I’ve written a lot about compensation plans. If you’ve read some of my articles on the topic you already know that compensation plan design is all about rewarding the behaviors you want to see from your distributors. Your options for rewarding and incentivizing distributors go beyond commissions. Non-commission incentives can be an integral part of a wholistic approach to compensation. Creating incentives outside of your comp plan—think car programs and trips—gives you a chance to get creative. If you do it right you can get more—more loyalty, more excitement, more sales—for less money.
Companies don’t usually publish the amount they pay out in incentives and trips. Our experience has been that network marketing and party plan companies allot different amounts to this portion of their budgets. Typically, we see companies allocate 2–5% of revenue to incentives. The compensation plan is the most important incentive that a company uses and is the single largest expense a company has. Several other types of incentives exist such as car bonuses, trips, rank recognition, and product rewards. You can use these tried and tested incentives in your own company or you can use them as inspiration for new incentives no one has thought of yet!
One way to reward your distributors is by giving them cars. The industry has had car programs for years, and when properly structured, they can be compelling for both the distributors and the company. Car bonuses can be paid in the commission payout. There are several reasons to use a car bonus rather than paying the distributor more in plain commission money.
First, the cars become a driving billboard for the company. Car programs can also foster a sense of “team spirit” if the car is a specific brand or color and all leaders have the same one like the famous Mary Kay Pink Cadillac.
Second, car programs create a lot of loyalty with distributors because the distributor can say “My company gives me this car on top of what I get paid every month.” Instead of paying a distributor $1,000 per month, a company can pay $500 in commissions and $500 in a car bonus. In some people’s minds, that adds up to more than the $1,000.
Car bonuses are a powerful incentive, but the qualifications must be properly designed. Most car bonuses require the distributor to buy or lease the car and the company reimburses them if they qualify. This can create tremendous hardship if distributors get the car before their business can support it month-to-month. If you choose to use a car bonus, you should make sure that it goes only to distributors with well established businesses.
Another way to reward distributors is by sending them on trips. Cruises are a popular option but there are all kinds of ways you can design this sort of incentive. Companies usually pay for trips of some non-commissions fund such as a marketing budget. Often trips combine with trainings or company conventions. Distributors may earn a trip to the convention as a reward for sales. Companies can also set up trips to reward different levels of distributors. For example, free trips to the national convention may go to one level of distributor and free trips to regional events for a lower level of achievement.
Another common way of recognizing distributors is by making their rank achievements more tangible. Most companies recognize distributors for reaching and maintaining ranks. The notion is so engrained in the industry that distributors often talk about their “pin rank”—the highest rank a distributor has ever achieved. The name “pin rank” refers to the use of custom jewelry celebrating the rank achievement.
In the wake of Vemma’s and Herbalife’s troubles with autoship orders, some companies are using non-commission rewards programs for autoship. In the past many companies required autoship for some bonuses but with regulators frowning on this practice, it’s a good idea to think of other incentives for autoship. For example, you might design an autoship rewards program in which distributors and customers earn points that can go toward product purchases.
Party plan companies seem to spend more on trips and incentives than network marketing companies do. In addition to the types of incentives detailed above, party plan companies have distributor awards and hostess rewards that are constantly changing. When you design trips and incentives you need to focus on rewarding product sales, just like you do when you design a commission. Incentives and rewards provide another avenue to provide recognition for sales. If you design them right, the emotional pay off your distributors will get from achieving them can be great.
Want help designing your incentives and rewards? Reach out to us at MLM Compensation Consulting. We offer data-driven compensation plan design and analysis.
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