Stairstep breakaway plan
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This type of multi-level marketing compensation plan is characterized by having representatives who are responsible for both personal and group sales volumes. Volume is created by recruiting and by retailing product. Various discounts or rebates may be paid to group leaders and a group leader can be any representative with one or more downline recruits. Once predefined personal and/or group volumes are achieved, a representative moves up a step. This continues until the representative "breaks away" from their upline. E.g. if representative had 10 steps/level below him, as soon as 11th level/step is formed/recruited, the original group will no longer belong/attached to the first member. Although, it will be still the group of all his downlines (because for them it is not 11th level). So, at anytime, or all time, a group will consist of only 10 steps and as soon as the 11th step is joined, the oldest step will detach from that group). From that point on, the new group is no longer considered part of his upline's group - hence they are a "breakaway". Most stairstep commission plans also have some small pool commissions or an infinity commission, but these commissions are typically a very small percentage of the overall payout. Stairstep breakaway plans are not level based.
Modern network marketing companies began to deal directly with all the distributors due to advances in technology. Previously, commission plans were calculated by hand and only the top sales leaders were paid by the company. These leaders then calculated what their downlines should be receiving and paid them accordingly. The stairstep evolved in the computer age; it was designed to be calculated by the computer. It is, in fact, almost too complex to be calculated by hand.
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- The oldest and largest network marketing companies, like Amway and Tupperware use this compensation model.
- Inserting and removing ranks, such as supervisors, assistant managers or regional managers and national managers, is very easy to do.
- Changing percentages is very easy to do. Such changes may reward more distributors or may reward the fewer higher-level distributors.
- There is no limit on the size of downline increasing the earning potential of stairstep breakaway plan.
The chief disadvantage of stairstep breakaway plans is the tendency for inventory loading. Unless the company aggressively monitors them, distributors will tend to coach their subordinate distributors to amass inventory to gain rank.
A stairstep plan, on average, pays the highest earners more money. The highest earners are not always necessarily at the 'top' of the organization. Whereas a unilevel plan typically pays the mid range saleforce more.
- Rawlins, Mark (2002). Understanding Multi-Level Commissions and Their Role in a Successful Company.