Science Behind an Effective Pay Plan
A Philosophical and Historical Perspective of Compensation Strategy
by Mike Akins
The following is an expository on the company compensation program and pay plan. During my career of more than three decades, I have found that the majority of networkers do not understand the dynamics of compensation programs. This is not a reflection of the individual's intelligence level but is due to the lack of statistical information available in our industry. I employ a staff of statisticians who compile data for my use in marketing strategies. In order for you to understand the significance of each feature in the company compensation program, I have included in this analysis an overview of industrial statistics, marketing trends, historical precedents, the effect of present and past marketing philosophies, along with the fundamental principles by which our industry functions. Only when you understand the dynamics that control results in this industry, can you measure a pay plan effectively.
In order to understand the merits of the company compensation program, you will need to understand the dynamics of "true" network marketing. There are market forces and business principles that determine what works in this industry. Sometimes these factors are not obvious but very subtle. For an example, our surveys revealed that, in the past 2-3 years, more than 2 million networkers have been victims of failed network marketing programs. They were working against factors that they did not fully understand. During this period, another 2 million have switched programs. A majority of these programs were flawed from their beginnings. A great number of these individuals have repetitively made the same mistake in their selection. They simply do not have a complete picture of what to look for in a viable program. Our research discovered that a number of these individuals left viable (good) programs because they didn't know how to recognize or how to work a viable program. Again this is not due to a lack of intelligence or skills on the behalf of the distributor, but the lack of statistical information and "trade specific" training.
During my first eight years of network marketing I suffered from identical circumstances. Repetitively, I would build only to lose. I was literally spinning my wheels. In this synopsis, I will share what I have learned during my successful career of more than three decades in this industry. Also, I will share information that I have obtained from Research & Marketing Consultants and ABM Marketing, which are statistically based conventional firms that I own. These firms have studied the network marketing industry extensively. Recently, these firms completed a study of more than 300 programs. Marketing trends, attrition factors, compensation strategies, product philosophies, support strategies, growth patterns and many other issues were carefully researched. Now you, the networker, can have the same statistical support that other industries have enjoyed for years.
Generally, when a networker analyzes a program's potential to produce compensation, they look to the pay plan. In reality, it requires more than a theoretically lucrative pay plan in order to produce adequate compensation. In network marketing, the equation for success contains several factors. The pay plan is one of these factors. Each of these factors influences the effectiveness of the other factors. For example, a great pay plan may not produce great paychecks because of inferior products or ineffective marketing systems and strategies. A great product line may never produce great sales due to poor marketing strategies or lack of pay incentives. A program with both quality products and a lucrative pay plan may fail to "fly" because of the company's failure to keep up with the growth and provide quality service. A program can have certain strengths but contain weaknesses that attract the wrong type of networker, causing stagnation and excessive attrition. A pay plan may be imbalanced, awarding one segment of networkers at the expense of another.