What is spillover in network marketing and how you can benefit
- June 18, 2020
You probably are thinking what is spillover in network marketing because you hear that phrase a lot.
Chances are someone probably approached you about a MLM company and talked to you about this so called “get my spillovers if you join right now”.
It’s actually a pretty common practice in direct sales and I am going to show you EXACTLY what is spillover in MLM.
What is Spillover in MLM?
Alright before we dive into this whole spill over think, I am going to teach you the basics of MLM.
First MLM stands for Multi-level Marketing which is just another term for network marketing.
Network Marketing gives you the opportunity to earn on more than one tier in a compensation plan.
For example, affiliate marketing you are paid a flat commission on your personal customers.
Where in network marketing, you can earn on multi-levels that can be any where between 3 levels to infinite depending on the compensation plan structure.
Binary Compensation Plan
The most popular compensation plan is called a “Binary compensation plan” which looks like a pyramid.
If you take a look at that picture, you are at the top of that compensation plan and for you two qualify to earn, you have to sponsor TWO people.
One on the left and one on the right.
Once you do this if people above you sponsor someone, they can land in your structure which causes this spill over effect.
You might be thinking “But Jesse, isn’t that a pyramid scheme or scam?.
Great question by the way.
According to the FTC, if the company is producing most of it’s sales from retail customers it’s considered a legal company.
A pyramid scheme is when there are more affiliates being sponsored than retail sales.
Yes it could be a fine line…
Matrix Compensation Plan
A matrix compensation plan is probably the king of spillovers when it comes to network marketing.
However, most of the company that lead with this “spill over” with a matrix compensation plan end up being a pyramid scheme because they don’t normally have products.
Example above is a 5×5 matrix where you are at the top, and your second tier has 25 levels where your third tier has 125 levels.
You can get spill overs here as well just like the binary plan but it’s even easier.
You don’t have to sponsor anyone personally to qualify in these compensation plans.
Normally there is a flat fee PER tier.
So for example to earn on your first level you drop let’s say $20 and once that fills up, you cycle out of that tier and land in the next tier.
From there you pay another fee where it’s higher to start earning there.
The problem with this is pretty simple.
Focus is entirely on recruiting people without selling any products which makes this plan a pyramid scheme.
Like I said early in order for a network marketing company to be legit, they MUST have more retail sales going on than affiliates.
Unilevel Compensation Plan
This is another compensation plan that is VERY popular when it comes to network marketing.
I put this in here because it’s VERY popular and has a small spill over effect.
With the binary and matrix, spill overs can be infinite levels where in the unilevel there is always some kind of cap.
They normally range from three levels to ten.
Basically you are at the top of this compensation and ALL your personally sponsored affiliates go on to your first level.
Your level two is all of your level ones personally sponsored affiliates.
As you can see there is some spill over effects here as well but not as much because of that cap.
Truth About What Is Spillover In Network Marketing
First it can potentially put your network marketing company in pyramid scheme territory when you lead with the compensation plan instead of the products.
The second issue is the mindset joining a company purely on spillovers.
Truth of the matter is in order for you to be successful, it has to be more than just the spillovers.
You must like the products in your company and LEARN the skill sets to actually sell those products and bring in new affiliates at the same time while keeping that balance.
When people lead with network marketing spillovers, they are misleading you of thinking it’s going to be VERY easy and you don’t have to do any work.
What this ends up doing is very simple.
They end up getting people that don’t do anything and expect to make money over the spillovers.
Trust me when I first got started in network marketing, I had those kind of peoples.
Heck even I am guilty of this when I was new to the industry.
I thought it was going to be easy money but it ended up being much much different.
In fact, it was harder than my job…
So what did I do?
I decided instead of taking the easy route, I wanted to know EXACTLY how to become successful doing this.
Trust me I thank myself for that decision today.
If I decided to go on that path of failure, it would have taken me 35 years as a car mechanic to make what I did in 6 years online.
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I hope you enjoyed my this blog and know what is spillover in network marketing and if you have ANY questions feel free to ask in the comments below and I will get back to you as soon as I can.
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