MLM Compensation Plans: The Matrix Model
Out of all MLM compensation plans, the matrix model (also known as the forced matrix) is probably the simplest to understand. Looking, dare I say it, somewhat like a pyramid you start off at the top of your matrix and as you grow your organisation fill in allocated spots below you.
There are of course slight variations that can be applied to the matrix model but overall the functionality is virtually the same. As your organisation grows the levels of your matrix increase and these levels provide you with residual income. This residual income is paid out in commissions via the product sales or recruitment those in your organisation achieve.
Your basic matrix model for an MLM compensation plan involves two size factors, A x B.
A is your frontline and is the number of levels wide your matrix is. It is comprised of members you personally recruit into your organisation.
B is also a number and is the number of levels deep your matrix is. Some compensation plans cap this number whilst others don’t.
Your standard MLM compensation plan matrix looks something like this:
The above is a 3X2 (2 levels deep and three levels wide) matrix and is a simple example. More complex matrix models can extend infinitely wide and deep or have limitations placed on the size so as to either force a matrix cycle or cap commission payouts.
The two biggest variations in matrix models are whether or not the matrix is fixed or not
The fixed matrix model
The fixed matrix model places limitations on your standard matrix, usually in the form of size restrictions. Typically there will be a cap in the form of A x B so as to trigger a cycle event.
A cycle is what happens when the matrix fills up and typically involves the person at the top of the matrix ‘cycling’ out and being rewarded with a commission payment.
After cycling the member is then placed into another existing matrix within the company, or at the top of a new fixed matrix. From here the member attempts to fill up the matrix again for another commission payout.
Fixed matrices are usually capped at small numbers (2 x 3 or 2 x 2 are quite common) so as to reward regular commission payouts for those who mass recruit into the business.
Due to the nature of the fixed model it is commonly affected by what’s called spillover. I’ll explain spillover a little later but the gist of it is your matrix can be faster filled off the work of your upline or those above you in a fixed matrix.
The standard matrix model
This standard variation of the matrix compensation model is a lot freer in that there are no restrictions on the width and depth of the matrix you create. Each person on your frontline spawns off an independent branch of your matrix and over time the idea is to grow these branches several levels deep.
Due to there being no restrictions on the size of your matrix, you can have as many people on your frontline and grow your organisation as many levels deep as you can achieve.
The standard matrix compensation model isn’t affected by spillover as each branch under your frontline run independent of each other. Because of this the unfixed matrix model initially relies more heavily on your own ability to fill it with recruits. In this sense team leverage is diminished in the early stages of building your organisation.
What is spillover?
When you join an MLM company with a fixed matrix compensation plan model, you’re placed at the top of a new matrix. This matrix however is a branch of your upline’s matrix, which in turn is a branch of their upline.
Spillover is what happens when someone above you in a parent matrix fills up a spot on their matrix which corresponds to a spot in your downline on your matrix.
Say for example you’re on the frontline of your uplines fixed matrix and your upline fills their frontline. The next level down (the frontline of your matrix) can then be filled over time by the recruiting efforts of your upline as they fill up the other levels of their own matrix.
Here’s an example;
In the above matrix you can see how your own matrix fits in with that of your upline. For spillover to occur, let’s say your upline has filled their frontline (spots A and B), which you are on.
You directly recruit someone to spot C and then your upline manages to recruit another member. Due to your frontline being on their matrix spot D is filled via your upline. Spot D being filled affects both your own frontline and the matrix of your upline.
This affect is called spillover and requires no effort on your part to fill a spot on your own fixed matrix.
Due to the simplicity of the matrix model it is quite popular with new MLM company startups. Unfortunately due to the reliance of recruitment as a primary factor in commission payouts there is a very real danger of recruitment becoming a primary objective for the new distributor. This in turn takes away from retail product sales and at the extreme level, from the product altogether.
Obviously each MLM company is different in this regard and prospective member’s really need to do their research on each business opportunity they are contemplating.
One simple way to establish how your potential upline runs their business is to ask yourself were you shown the business opportunity or the product first?
That should give you a decent enough indication of what the primary focus of the business is, recruitment or sales. Be aware that if it’s recruitment this is typically unsustainable and you could be joining a short lived money exchange operation.
As always, research, research, research. And then research some more. Good luck!