Multi level marketing, or MLM, is a great way to earn money. The secret to earning money successfully through MLM is to be a great internet marketer or have a wonderful social network structure in place. For this you will need a perfect reputation of having the ability to earn money online and help your down line earn some too. However, before jumping on to the MLM band wagon and if you are not too familiar with the techniques of MLM you must understand the various MLM compensation plans. We will try to explain them in brief in this article.

The main MLM compensation plans are:

Matrix plan, percentage plan, infinity bonus plan, uni-level or forced matrix plan, binary plan, and two-up plan. Let us understand the most popular i.e the first three in a bit more detail.

A matrix plan means that you sign up someone on your next tier and each of those people sign up people on their next tier and this system continues. The resulting people under you constitute your down line and you earn from the sale of every member in your tree. This matrix continues to grow every time someone signs up in your down line.

The percentage system assures you of greater profits from each level. Suppose you had 3 people in your first level and they each signed up 3 people under them you will have 9 people in your second level. If these 9 people signed up 3 people each of you will have 27 people in your third level. You have a total of 39 people in your tree and if you get 10 percent commissions from sales from level three and 5 percent from levels 2 and 3 it will be more lucrative than getting a consolidated 7 percent from all 39 people.

In the infinite bonus plan once a marketer reaches a certain level of earning he breaks away and forms his own group. This means that earnings for the up line are significantly reduced but it does help the continuity of the program by ensuring the feasibility of the economics of the MLM.

The compensation plan of any MLM program is very important to the success of any MLM campaign. First and foremost, if you find that the MLM management is keeping a greater profit margin for themselves, no matter what their excuse you can be rest assured that they are convinced that the MLM is not going to last very long. This is the reason they are collecting as much profit as they possibly can while the going is good.

A well planned and managed MLM program will distribute greater profits among it’s affiliates and keep a minimum for itself. Keeping in mind that the program is earning from each and every sale in the down line, they will earn much more than any single affiliate anyway.