Compensation Plans: Activity Creates Results
This is the third in a series of four articles, each of which will focus on one important aspect of the best direct sales compensation plans and presents practical strategies to consider in the design and enhancement of all party plan and multi-level compensation plans. The topic of this compensation plan post Activity Creates Results.
Why Are Activity Requirements So Important?
Activity requirements are important because direct selling companies want their independent representatives to continue selling (and optionally purchasing for personal use) the company’s products and services.
Here is the relationship…
Activity Requirements = More Sales = More Profits = More Field Compensation
Activity requirements increase sales, company profits and enable more compensation to be paid to your sales force.
Compensation Is Earned, Not Given
Remaining an independent representative of a direct selling company and being eligible for multilevel compensation is an earned privilege, not something that is given to representatives as a right. While rights are granted without conditions, privileges are earned by actions.
To Remain A Representative
To remain an independent representative of a direct selling company, one must either (a) pay a required monthly or annual fee and/or (b) generate a minimum amount of personal sales volume over a rolling period of time. When this occurs, a representative is deemed “active.”
When a representative does not meet the direct selling company’s activity requirements for an extended period of time, those representatives are deactivated.
Requirements To Earn Compensation
Don’t make the legal mistake of confusing personal sales volume with personal purchase requirements. The difference is subtle but important.
IMPORTANT: The best direct sales compensation plans never include a personal purchase requirement.
Personal sales volume is the sum of sales volume generated from the personal orders placed by a representative and the orders placed by customers sponsored by a representative in one or more commission periods. One can have personal sales volume without making a personal purchase.
A representative must be “bonus qualified” in order to earn compensation upon the sales volume of other representatives. To be bonus qualified, independent representatives of direct selling companies are required to generate a specific amount of personal sales volume. Sales volume is a measure of points associated with purchases that help qualify an independent representative to meet personal activity requirements, rank promotion, and rank maintenance requirements.
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