Compensation plans is an important aspect in a direct sales business. There are different types of compensation plans and two such popular compensation plan is the binary and matrix compensation plans. Under binary compensation plan, each distributor has two legs which is the weaker leg and stronger leg and earnings derive mainly from the weaker leg’s volume or pairing rules. For a matrix compensation plan, growth is limited: once a matrix grid is filled, a new cycle or unit begins, limiting unlimited depth. The matrix also emphasizes group sales and balanced fill of positions. The binary structure favours fast expansion but risks arises when one leg lags. Direct sales companies must align the plan with their distributor base’s capability, product type, and business maturity.
