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Trends in Popular MLM Compensation Plan Types

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Many times, I get asked “What is the best MLM compensation plan?” The answer is “It depends.” There are three plan types. All three are popular with top U.S. companies. In other words, all three plan types can be wild successes. Today, I’m going to breakdown the compensation plans used by those top companies. But first I want to clarify what the three plan types are and, from a practical perspective, what we mean when we talk about plan type.

The three plan types

The three MLM compensation plan types are breakaway, unilevel, and binary. Each type gets its name from its base commission. Most companies use a range of commission types to reward different behaviors. I categorize commissions into four basic types: base, front-end, mid-level, and high-end. Today we are discussing plan type, so we are only looking at base commissions. What do base commissions do? Companies use a base commission type to give distributors a stable income at around 5% of their organization volume.

While many pieces of a MLM compensation plan change over the years, most companies will never change their base commission after it has been established. So, if a company starts out as a unilevel, chances are they will be a unilevel forever. They may change ranks, rules for qualification to reach ranks, or any commissions in the three other categories I mentioned above. But changes to the base commission are rare. (One exception is Nature’s Sunshine. Recently they changed from a breakaway to a unilevel base commission, and the decision didn’t hurt their revenue. In 2020, they showed an increase in sales.)

Trends in popular plan types  

The most popular and successful plan type changes from year to year and decade to decade. In order to analyze the trends in plan types , I looked at 107 of the top U.S. based companies. These companies all had at least $50M in revenue in 2020. I reviewed each of the company’s compensation plans and categorized their base plan as either breakaway, unilevel, or binary. Then I broke them down by the decade in which each company was founded. Plan type popularity comes in waves, and you can see that reflected in this breakdown.

First, let’s look at the totals. Breakaway plans make up 29.9% (32) of the top companies. Unilevels make up 47.7% (51). Binaries make up 22.4% (24). So, most of the top companies utilize a unilevel plan.

Now let’s talk about the trends.

Breakaways dominated in the 1860s, 1880s, and from the 1950s through the 1980s.

Unilevels did not get a foothold until the 1990s. (There are a few decades in which unilevels were most popular before the 1990s, but these early unilevel plans were one or two levels of pay—almost unrecognizable as the same plan type as the deep unilevel plans that were popular in the 1990s.) From the 1990s until the present, unilevels have dominated. However, you can see that binary increased in popularity over the same time period.

DecadeBreakawayBreakaway PctUnilevelUnilevel PctBinaryBinary PctTotal
1850  1100%  1
18601100%    1
18801100%    1
1910  1100%  1
1940267%133%  3
19505100%    5
19601100%    1
1970675%225%  8
1980660%440%  10
1990314%1257%629%21
2000312%1662%727%26
2010414%1448%1138%29
Total32 29.9%51 47.7%24 22.4%107

Trends among billion-dollar companies

Let’s look at the same breakdown limited to companies with at least a billion dollars of revenue. If we look just at the 19 billion-dollar companies, 47.4% (9) are breakaway base plans, 36.8% (7) are unilevel plans, and only 15.8% (3) are binaries.

You can see that unilevel is in the lead from the 1990s to the present. In the early years of direct selling, breakaways were the most common. They’ve been around the longest, so it makes sense that they have more in the billion-dollar club.

DecadeBreakawayBreakaway PctUnilevelUnilevel PctBinaryBinary PctTotal
18801100%    1
19401100%    1
19501100%    1
19601100%    1
19702200%    2
1980267%133%  3
1990  360%240%5
2000120%360%120%5
Total947.4%736.8%315.8%19

Plan popularity broken down by product type

I also categorized top companies by primary product sold—clothing and accessories, home care, leisure/educational, personal care, wellness, and multiple categories.

One area that stands out is personal care. 50% of personal care companies use a breakaway plan. Companies like Mary Kay, Rodan & Fields, and Monat Global all use a breakaway plan. It is not that a personal care company must use a breakaway. However, Mary Kay set the trend. When they added a multilevel commission (see Alan Luce article), they used a breakaway plan.

The wellness category shows that plan type doesn’t necessarily depend on product category. 48% (19) use a unilevel plan. 40% (16) use a binary plan, and 13% (5) use a breakaway plan. Popular wellness company doTerra uses a unilevel plan, and they started in 2008. Team Beachbody, another popular wellness company, started in 1998 and uses a binary plan. Herbalife started in 1980 and uses a breakaway plan. All three of those companies are over one billion in annual sales.

Product CategoryBreakawayBreakaway PctUnilevelUnilevel PctBinaryBinary PctTotal
Clothing & accessories343%457% 0%7
Home Care556%444% 0%9
Leisure/Educational120%360%120%5
Multiple838%1048%314%21
Personal Care750%536%214%14
Services327%655%218%11
Wellness513%1948%1640%40
Total3230%5148%2422%107

Conclusion

By looking at the top U.S. based direct selling companies, you can see that all three types of base compensation plan can be huge successes. All of the compensation types are in the top 107, and all the compensation types are in the top 19 billion-dollar companies as well. And you can see that all three types are used in almost all the categories of products. The least popular plan type among top companies is the binary plan. This may just be a function of it coming on the scene later than other plan types. However, it has grown in popularity.

Like I said at the beginning the best MLM compensation plan type depends. Each plan works, but each plan works differently. To see the details, pros, and cons of each plan type check out our articles detailing each—binary, unilevel, and breakaway. Or reach out to us directly for a consultation about which plan type would be best for your company and product.


 If you feel like your compensation plan needs a checkup, reach out at MLMCC.

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