Trends in Rank Advancement Bonuses
The rank advancement bonus can be used for a variety of reasons. Today we are going to talk about rank advancement bonuses of 102 top U.S. based companies. The data for this report comes from publicly available compensation plans and was gathered in 2019. Of those 102 companies, 32.35% of them used a rank bonus. A rank bonus is usually paid one time on the first time a distributor hits a new rank. The purpose of a rank bonus is to reward distributors who target their energies to get to a rank. A company may not be able to afford a permanent bonus at a new rank, but a rank advancement bonus can reward the push to a new rank. The hope is that once established at the new rank, the behaviors to get their will provide the needed reward to stay at that rank.
We break compensation payout into four categories, base, front-end, mid-level, and high-end. The four types work together to provide a smooth transition between ranks as a distributor moves up the ladder. The rank advancement bonus can be used to provide a boost to distributors at any rank level of the compensation plan, low end, mid-level or high-end.
Now let’s look at those top 102 companies.
- Approximately two-thirds (69.70%) fall across two or all three ranges of ranks (low, mid-level, high-end).
- Almost half (48.48%) required rank maintenance for multiple months to receive the reward.
- Almost forty percent (39.39%) required rank advancement within a set time.
- Breakaway (35.38%) and Unilevel (35.32%) plans use rank advancement at the same rate. The binary (21.74%) plans use rank advancement less often.
- Of companies founded in the 2000 decade, 38.46% used a rank advancement bonus and in the 2010 decade, 42.31% used a rank advancement bonus.
Level of Rank Advancement
The rank advancement bonus makes the most sense to us at the mid-level. The way this data was analyzed was that each company’s number of ranks was broken into three groups. This allowed us to analyze across companies which used differing number of ranks.
Companies have gotten good at using a fast-start bonus to get lower level ranks a higher percent of their organization volume. We often see a drop off at the mid-level ranks in terms of percent of earnings of organization volume. It is almost like a shelf where distributors get stuck at the same payout even though their organization volume increases. Adding a midlevel rank advancement can provide a temporary boost while the the distributor builds. The majority of companies spanned all three levels of ranks (27.27%) or spanned low to middle (24.24%) or middle to high (18.18%).
|Level of Rank Bonus||Company Count||Percent|
|All Three Ranks||9||27.27%|
|Low and Middle Ranks||8||24.24%|
|Middle to High Ranks||6||18.18%|
High End Rank Bonus
Companies that reward high-end distributors use a big check ($100,000) and typically pay that rank advancement bonus over several months. A high-end distributor rank bonus provides an incentive for those that are creating new sales leaders and new sales distributors in their organization. It can be tricky to tell who is doing the actual work in an organization. Sometimes companies’ setup rank qualifications in such a way that a distributor can advance in rank that is not doing the work. We call those lottery winners. Sometimes that high-end rank advancement can be a real showstopper. You can show that big check to the rank advancers at the annual convention.
Maintain Rank for Multiple Months
Having multiple month consistency is a good rule. You would motivate the distributor to maintain the new rank and then pay out the bonus. In the mid-level distributors are often transitioning from being a salesperson to a sales leader. This shift from making most of your money off sales to customers to making the most from your downline’s sales to customers can be a difficult shift. The rank bonus can make that shift smoother.
In addition, almost 40% required that you reach the rank within a certain amount of time such as 1 month to 3 months from the time you reached the last rank. This requirement makes sense. Especially at the beginning ranks. Getting people to $300 a month is critical for retention. By providing rank advancement bonuses based on a time window, you encourage the move to a rank that is more likely retained.
Rank Advancement by Base Commission Type
In comparing the prevalence of rank bonuses by base commission, we found that the binary base commission type had the lowest rate (21.74%). More than a third of breakaway (35.48%) and unilevel plans (35.42%) offered a rank advancement bonus. When we analyze compensation plan payout and ranks, we often see that rank doesn’t mean much in terms of earnings and organizational volume.
Decade Company Started and Rank Advancement Bonus
One question that we wanted to answer was “Are rank advancement bonuses getting more popular?” 38.46% of companies that started in the 2000 decade utilized a rank bonus. Eleven (42.31%) out of 26 companies that started in the 2010 decade used a rank bonus.
|Decade||Number in Decade||No. of Rank Bonus||Percent|
In summary rank bonuses can be used for a variety of reasons. The research showed that most of the rank advancement companies included bonuses for the mid ranks. This makes the most sense to us. However, we can also see a benefit in a low end and a high end rank bonus. A company needs to understand what behavior they are trying to reward and then design the bonus to fit that behavior. Contact us at MLM-cc.com or firstname.lastname@example.org for more information on rank advancement bonuses.
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