Chances are, if you’ve spent much time in the MLM industry, you’ve heard of the unilevel compensation plan. Most direct selling companies nowadays use this commission type in some form, and it’s easy to see why—it’s flexible, motivating, and easy to understand. But what really makes a unilevel a unilevel? Why does this plan type have an edge over so many others that have failed? We’ll cover all of the basics for you—how a unilevel works, its strengths, and its weak spots.
As its name suggests, a unilevel is a type of level commission. That means that the pay structure is based on the number of levels of distributors a person has beneath them. Qualifying for payment, though, usually depends on a person’s rank. To move up in rank, most companies ask distributors to meet specific requirements, like having a certain amount in group sales volume during a commission run. As distributors earn higher ranks, they can be paid on more of their downline levels.
For example, here’s a simplified unilevel payout model:
Distributor A, a 1-star rank, can earn a commission on one level of downline sales. Distributor B, as a 2-star, gets a commission on two. C qualifies for three levels, and D, as a 4-star rank, earns a commission on four levels of sales.
Most unilevel commissions get a lot more complicated (for instance, using different percentages for different levels), but a basic payout structure stays pretty much the same—a higher rank means more levels and more commissions.
One of the reasons unilevels have been so successful is the fact that they naturally encourage building an organization that’s both deep and wide. Distributors want to build deep organizations—ones with a lot of levels—to set up their earning potential as they move up in ranks. More levels mean more sales dollars ready for commissions as soon as the distributor advances and qualifies for the next bracket of earnings.
But having wide organizations—with a lot of people on each level—maximizes distributor paychecks by giving them a greater number of people making sales and generating commissions. And, as an added bonus, those higher volume numbers help them qualify for new ranks faster!
By building both wide and deep, distributors get the most out of the comp plan for their own organizations while, at the same time, helping your company to build a strong foundation of sales volume. Genius, right?
Another advantage unilevels have is a flexible commission structure. Like we said before, distributors are free to build deep, wide, or any other way they’d like to. Generally, this flexibility is a very positive quality. (But make sure to check out the Cons section, too—a lack of rules can become a problem fast!)
Unilevels are also flexible in size. Because they work for both big and small commissions, direct selling companies can use them in a lot of different places in their comp plan. If they’re in the plan as a core commission, they’re typically designed to be 5 or 9 levels deep. Smaller unilevels fit well into enroller downlines (like binary plans commonly use) or as motivators for specific distributor groups, like mid- or high-level earners.
And don’t forget—once you’ve decided to put one in your plan, a unilevel’s rules and payout percentages are completely up to you. The model is so versatile that it’s the easiest plan type to tailor to your company’s goals and comp plan.
Unilevel commissions were made as an alternative to the breakaway plan type. They were designed to be easier to understand and explain, making them a lot more successful. Over the years, as all MLM plans have changed to accommodate global markets and a modern world, their details and rules have become just as complex as modern breakaways. Thankfully, the core unilevel model is so easy to visualize and understand that the basics are still (generally) simple to describe to people who want to join.
The last advantage we’ll talk about is one of the biggest reasons for the unilevel’s continued success—its ability to encourage sales. The mark of any successful compensation plan is a well-paid group of salespeople (mid-level distributors) and the people directly over them—sales leaders. Because unilevels pay their distributors based on levels, they naturally do well at rewarding people who have both a mid-sized downline and a talent for making sales.
Stacking is at the top of the list for unilevel cons. It’s a dishonest way to build an organization that takes commissions away from the distributor’s upline leaders and undermines the company payout structure. Here’s an example of how it works using our simplified unilevel payout model from above:
In the first, unstacked group, Distributor A earns a 5% commission from the sales of her first-level distributors. If each of them generated $100 in sales, she’d get a $20 commission check for the run period.
In the stacked group, Distributor A has enrolled four false (or co-conspiring) distributors between her and the real recruits, creating artificial layers. This way, the real commissions amplify as they make their way to her through the fake accounts, raising her earnings to from $20 to $100.
Distributors can be drawn to stacking for an easy commission boost, but they often don’t realize how harmful it is to their upline. Now that they’ve “beaten the system,” their upline distributors are too far away from the real sales to make a profit, and aren’t likely to continue offering mentorship and support, making future progress nearly impossible. They also miss out on the benefit of having a both deep and wide organization, losing the chance to max out their earnings long-term by chasing a quick paycheck.
It’s hard to eliminate a stacking problem once it becomes widespread in your organization, but taking steps to prevent it—like introducing front-end bonuses and incentivizing non-stacking behaviors—can be helpful in solving the problem.
Needs commission supplements:
Another disadvantage to using a unilevel as your company’s core commission is the fact that they don’t inherently pay beginning or high-earning distributors very well.
Beginning distributors struggle to see a good return on the time they’ve put into growing their organization until they have at least 2-3 levels that are relatively full. High-earning distributors, on the other hand, tend to outgrow the plan—in, say, a 5-level unilevel model, any sale on the sixth level or farther is out of their reach.
To counteract this issue, you’ll need to add supplemental commissions and other programs or incentives that reach and reward those groups.
An older model
Another drawback comes from the unilevel plan’s age. Even though it’s not as old as, say, the breakaway compensation model, unilevels aren’t getting any younger (and, in some cases, any more interesting). There is some risk in going with a “safe” commission at your core, especially if it’s not updated or interesting to your target distributors.
So, could a unilevel commission work in your plan? There’s a good chance, considering its widespread success and versatility. But make sure you’re aware of the drawbacks that come with this commission type and prepare to counteract them. If you’re looking for a well-tested payment plan that encourages sales and adds flexibility to your compensation strategy, the unilevel can be a great fit!
To learn more about our commissions consulting services, click here. For more on unilevel commissions and compensation strategies, pick up a copy of Mark Rawlins’s book From Commission Plan to Compensation Strategy.