Most “hot, new trends” in MLM compensation plans are nothing more than tweaked-up reincarnations — fancy new names with dazzling new packaging — of tired, discredited old barker’s eggs that companies trot out for another spin because they earn so much hidden, windfall profit from them.

(Don’t know what barker’s eggs are? Actually, they’re very familiar to you. Visit http://barkerseggs.com.)

Binary compensation plans are just re-hashed attempts to breathe fresh life into the notoriously-flawed 2 x 12 automatrix plans of the 1980s and early 1990s.

The 2 x 12 automatrix (or forced matrix) was the most unstable of all matrix systems. They were notorious for collapsing and taking thousands of people’s money with them.

So why do companies keep resurrecting and re-inventing them?

One simple, HUGE reason:

MASSIVE BREAKAGE

Breakage is bonus income that distributors (especially part-timers) fail to qualify for because of punitive group volume and downline rank requirements in most compensation plans. So it rolls right past them on its way upline. It’s the secret that network marketing companies never want to talk about, because it’s one of their biggest sources of hidden profits… at your expense!

Click the link below for a Special Report on Breakage and how MLM companies use it to fleece their networks — especially their part-time distributors, who make up 90% of all networkers!

Why BREAKAGE is your #1 threat in network marketing

No other compensation plan comes close to a BINARY plan for creating massive breakage that rolls up to the heavy hitters and the company.

In a typical binary plan, you only earn bonuses (usually at pitiful percentages, too) on the volume of your poorer leg. Your richer leg is untouchable by you. And then all that untouchable volume “flushes” every month in most binary plans.

Even that word — “flushes” — is deceptive. It creates a mental image of going downhill, with the force of gravity… it goes “down the drain”. But what really happens? The unpaid bonus income does anything but “flush”. It zooms straight upline to the handful of heavy hitters at the top of the organisation, and to the company’s coffers. If there’s anything “flush” about it, it’s the fact that their bank accounts are “flush” with money YOU couldn’t get hold of, despite YOU earning it for them!

Smart distributors do all they can to maintain as fine a balance in their legs as possible, so that they can maximise their income.

The problem is that you need to sleep at some time… and most companies operate globally. Spillover from upline can very quickly throw your delicately balanced volume right out the window. So you go to bed happy with your group balance, only to wake up to find that your upline has piled new people into your stronger leg — which pays you zilch!

Of course, you can usually buy more than one “business centre” (read “front-end loading”, which is a classic feature of illegal pyramid selling schemes), which lets you create more legs. But now you’re just juggling more balls in the air in the vain hope that you can outguess and outgun your upline as they pile more and more spillovers into the wrong leg.

The ONLY people benefiting from all this frenzied juggling are your upline heavy hitters and the company.

It’s a well-known fact amongst savvy network marketers that true income growth comes from width. As Tom “Big Al” Schreiter says, “if you want more milk, get more cows!”

He’s right. Payout on depth will always be limited because product prices are limited. The company can only pay out so much from the wholesale price of its products. So the only way you can earn BIG money from depth is by robbing your downline! (That’s where breakage comes in.) Learn more about width versus depth…

A company simply sets unreachably high group volume qualifications so that the majority of distributors fail to qualify. Too easy… the money rolls right up to the top of the tree and to the company!

So if you want to REALLY rip off the part-timers, you just

• limit their ability to build WIDE and
• force them to build DEEP!

So you invent a plan which allows them only two legs wide… but then pay them on only ONE of those legs — and the weaker leg at that!

But what about the “new” binary plans that claim to correct all these flaws?

First, it’s encouraging that they recognise and admit that traditional binary plans are fatally flawed. Interestingly, the pattern seems to be that they’re companies founded by former senior executives of other MLM companies that operated traditional binary plans. (That should tell you a few things — mostly that they lack any real depth of experience in network marketing, and they’re FIRST Generation managers. Not promising.)

These new companies, with their “new generation” hybrid plans — a bit of this plan, a bit of that one, then a pinch of something else and, hey presto!… a miracle plan! — are shrewd marketers. By combining the features of several types of other plans they cast a much wider net and draw in people who are used to those older plans, so they feel less threatened or uncomfortable.

There’s a famous horror story about this kind of approach to creating new “life” from old body parts. I’m sure you’re familiar with the story of Dr Frankenstein and his bizarre creation… and the havoc that resulted.

There’s another perspective on this approach, too.

Imagine that your new hybrid pay plan company sells a health care product that’s actually a deadly poison, but the product also contains multiple antidotes to counteract the adverse effects of the poison. “Yes, I know that (deadly poison) can kill you, but this product includes (antidote #1) to protect you from (harmful side effect #1), (antidote #2) to counter (harmful side effect #2), (antidote #3) to prevent (harmful side effect #3) and (antidote #4) to neutralize (harmful side #4). It’s the perfect solution to your problem!”

The real question is not whether the product is “perfect” for solving the problem. The real question is why would you take a deadly poison in the first place?

I’m well aware that this approach is not unknown in medical circles. After all, treating cancer patients with chemotherapy is a long-established practice. Immunization against deadly diseases using vaccines based on dead micro-organisms has saved countless millioons of lives. And, in complementary health care, the concept of homeopathy uses miniscule amounts of poisons to protect against, or treat, a range of conditions.

But that’s medicine and health care. This is business. There’s a limit to how far you can reasonably stretch an analogy, otherwise you wind up with something resembling a Heath Robinson “machine” or a Bruce Petty “system”… amusing to contemplate, but a true nightmare to try to make them work successfully.

There are only three reasons why anyone stays with a binary compensation plan…

1. They don’t have a clue — and don’t question anything. Not a promising prospect as a potential sponsor for you!

2. They know exactly what’s going on and plan to profit at YOUR expense — and the expense of their other downline drones (that’s how they see you). Not the most attractive quality in a prospective business associate either, true?

3. They’re already upline heavy hitters who are profiting at YOUR expense!

Just imagine… a distributor organisation full of either naive, ignorant “true believers” — mindless “lemmings” — or greedy, callous rip-off merchants.

Do you REALLY want to be part of such an organisation?

Extra reading: Visit John Godzich‘s article “13 Reasons Why Binaries Don’t Work for MLM”. Excellent!

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Author Profile  Consults to managements of direct selling companies, small business and home business owners. Writes regular columns and feature articles for various business media, online and offline. Author of several best-selling business books. Presents seminars and workshops, webinars and other training programs. Creator of Fourth Generation Thinking, Selling, Business Systems. Read more from this author