Binary MLM Plan - How Binary MLM Compensation Plan Works?

What is a Binary MLM Plan?
Types Of Binary Spillover
Binary Capping

What is a Binary MLM Plan?

A Binary MLM Plan employs a Two Legged (Left leg, Right Leg) structure in Multi-Level Marketing where each new distributor or member is placed on either left or right subtree. One subtree is known as a Power Leg or Profit Leg while the second subtree is a Profit Leg or a weak leg.

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Look Into The Different Scenarios Of Forming A Binary Structure

Before looking into the structure, try to understand the difference between a Sponsor and the Parent of a downline.

Sponsor: The distributor who introduced the new member to the binary network.

Parent: The distributor, who is the direct upline of the new member introduced to the binary network

Scenario 1: The Sponsor & the Parent of downlines are the same

If a distributor X sponsors A and If A introduces a new member B to the left position of A in the binary tree, then B is the direct downline of A. If again A sponsors a new member C, then it is added to the right of A since it was the vacant position. Now B, C are the direct downlines of A and the binary of A is formed to get the binary commission. A is the sponsor as well as the parent of B, C.

Scenario 2: The Sponsor and the Parent of the downline are different.

Here X sponsors A and Y, where Y is placed under the right leg of A and now A sponsors new member B, where B is placed under the left leg of A since there is no vacant position at the left leg of A. Now For Y, A is the parent and X is the sponsor. Here the sponsor and the parent are different for the downline Y. The binary of A is formed from its own effort and the upline’s (X) effort by spilling over the member Y.

Scenario 3: Spillover without completely forming the binary

Distributor X introduces or sponsors two new members A, X1 to the right, and the left leg of binary structure and binary of X is formed. Now A sponsors new member B to the right leg as the left position of A is filled by the new member Y, who is sponsored again by X. X also sponsors Z and places to the right of X1. Here Y, Z is spillover and placed under the downlines of X i.e A and X1. Y is placed under the left downline of X i.e A and Z is placed under the right downline of X i.e X1 When you look into the picture, it is understood that the two spillovers occurred on two sides of X without completely forming the binary on either side.

Scenario 4: Sponsoring only to the left leg of the binary structure

In this scenario, When A introduces two new members B and C. B is placed under the direct left leg position of A, and C is placed to the direct left leg position of B. Here C is the spillover which is placed to the extreme left.

Scenario 5: Normal spillover in binary structure

When the left and the right leg of any member is filled, the next new member sponsored will be placed under the next level as spillover. This is called normal spillover. When the distributor X sponsors new members A and X1, the binary structure of X is completed, and if X again sponsors the new members Y and Z, they will be placed under the next level as normal spillovers.

Types Of Binary Spillover

When the binary structure is formed for a distributor by introducing two new members to the right and the left leg, the next new members sponsored by the same distributor will spill over to the next available position. Where the spillover to be placed i.e the preferences of spillover depends upon the MLM company.

Extreme End (Left or Right) Spilling

The spilling preference can be set to the extreme end like the extreme right or extreme left leg of the binary structure. This type of spill is preferred by most of the MLM companies to make the distributors more engaged in the sales process since they need to balance their pair with sales volume to get the binary commission. Overall it enhances the group work and increases sales volume.

Multi-Position Spilling

The distributor may be offered multiple positions in the binary structure depending upon the joining package acquired by the distributor. When the first three positions in the binary structure get filled, the next immediate positions are filled by the spillover. This type of spillover preference is offered depending upon the joining package from MLM companies.

Weaker Leg Spilling

Here the newly introduced members are placed under the weak leg of the binary structure. The weak leg may be the left or the right leg of the binary and it depends upon the lowest sales volume acquired by the left or the right end so that the new member will be able to increase sales volume on the weaker leg.

Balanced Ratio Spilling

Here the spilling preference balances the binary tree with a 1:1 ratio. The new members will be added to both right and left combinations.

Binary Capping

Binary Capping is the amount set by the MLM companies to maintain financial stability. The turnover of the company may affect if the commission payout goes out of control. Binary Capping will depend upon Commission or Sales Volume

MLM Binary plan may have a capping (the limit or restriction on pricing or expenditure) per day. This limitation is based on the company’s rules.

Here, we are calculating the commissions earned by A , B , C and D in this binary network.

All the calculations done here are based on 10% P.V.

Here, we would be calculating the commissions received by A.

In this network, A recruits B and C (B = 100 PV and C = 100 PV ). Since the volume of sales on both legs are equal and they are matched,
Commission with respect to A
Commission earned by A = 10% of 100 = 10 USD.
In case the commission earned on both legs is not matched, then we will consider the leg with the lowest P.V, called the weaker leg, for calculations.
Commission from B
Now, B recruits D and E.
With respect to A , D and E will fall on its left.
D manages a P.V of 100 while E manages 200 P.V.
So the total PV on the left = 100+200 = 300 P.V.
On the right, C recruits F and G and F and G manages a P.V of 100 each
So, the total PV on the right of A = 100+100 = 200.
Going by the matching on the basis of weaker leg, right leg is the weaker leg since it could raise only 200 PV in comparison with 300 PV on the left side.
Hence, 200 PV from the right leg of A is matched with 200 PV from the left leg and the remaining 100 PV from the left will be carried forwarded on the left side of A.

Therefore, the commission earned by A from B and C = 10% of 200 = 20 USD.
Therefore, the total commission earned by A = 10+20 = 30 USD.
Commission with respect to B
B recruits D on the left and E on the right.
D earns 100 PV while E earns 200 P.V.
Since the left leg is the weaker leg , 100 PV from the left and right is matched. The remaining 100 PV from the right is carried forwarded to the right leg of B.
Commission earned by B = 10% of 100 = 10 USD
Therefore, the total commission earned by B = 10 USD.
C recruits F on the left leg and G on the right leg . Both F and G generate 100 PV each.
For C, since P.V on both the legs are equal, 100 PV on left leg is matched with 100 P.V on right leg and there is no carry forward in this case.
Commission earned by C = 10% of 100 = 10 USD.
Therefore, the total commission earned by C = 10 USD.

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Binary Capping Based On Sales Volume

This value is set based on the sales volume gained by the distributors in contrast with the joining package. If distributor X achieves sales volume from the left leg as 200, the right leg as 400, and the binary capping is set to 100 SV, then the commission will be provided only for the capping value of 100. The remaining 100 from the weak leg and 200 from the strong leg will be excluded and will not be taken for the next commission cycle. The company may prefer to set this capping daily, or weekly, or monthly.

Binary Capping Based On Commission

This value is set based on the commission received by the distributors in contrast with the joining package. Suppose distributor A joins with a joining package of $1000, the company may set the capping value to $5000 and the distributor will not receive commission more than $5000 as commission. This capping value can also be set daily, or weekly, or monthly.

Matching Bonus

The distributor receives a certain percentage of the commission from their downlines. If A sponsors B and C as the direct downlines and B sponsors D and E and earns a commission $10 then a certain percentage of $10 is earned by A since distributor A is the sponsor of B.

Custom Bonus

Many MLM companies create their own custom bonus to encourage their distributors and attract more distributors to join their binary network.

Return Of Investment

This type of fixed bonus will be achieved as a fixed bonus or a certain percentage of the investment made by the distributors in this binary business. If distributor X joined the binary network by investing $10,000 for this binary business, then X will receive a certain fixed percentage of the investment. I.e return of investment.