09 October 2005

Compensation Plans - Stair Step Breakaway Intro

There are five common compensation plans most widely utilized in Network Marketing today. In coming posts, I will offer some preliminary information about each. Tonight, I will share some basic information about the venerable "stair step breakaway" pay plan.

To get this started, here's some of what is contained at Wikipedia about stair step comp plans -

Stairstep Breakaway refers to Multi-level marketing compensation plans featuring two types of distributors: managers and non-managers. Stairstep Breakaway is the oldest and most common type of compensation plan.

No matter what use term the company uses to call their sales managers: 'executive', 'platinum' or 'Regional Vice President', upon achieving a certain performance criteria, a distributor becomes a manager and "breaks away" from his or her original manager. The original manager loses his or her managerial overrides and, instead, receives a percentage override from the sales of the entire breakaway organization.

This type of compensation model relies heavily upon titles and title attainment to assist in differentiating of the participants in the hierarchy. This is not necessarily a bad thing per se but, in my experience, pursuit of a "title" does not always produce a profitable business.

Stair Step is the oldest comp plan and most often utilized by new start-ups for it's stability. This model has been used continuously with little variation by Amway and their spin-off company, Quixtar.

Here's what Wikipedia notes as disadvantages in this pay plan -
The chief disadvantage of stairstep breakaway plans is the tendency for inventory loading. Unless the company aggressively monitors them, distributors will tend to coach their subordinate distributors to amass inventory to gain rank. Read the complete article...

Well, now we're underway.

Next time, I will elaborate on the Stair Step model in greater detail as I have the most extensive background in this type of pay plan. In the future, I will also post about the other common plans like the Binary, Unilevel, Australian 2-Up, and Matrix plans (in no particular order).


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10/23/2005 01:36:00 PM  

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