International Sponsoring And Commissioning by Mark Rawlins

A company’s decision to create an international commission system is historically one of the most difficult decisions a company makes.

There are two competing views

Many distributors believe that paying multi-level commissions are not just a sales method, but also a commitment to a philosophy. Because of this view, many distributors view a decision by a company not to pay full multi-level commissions to existing distributors as they enter new countries as, backing away from this commitment. In some ways companies get the same reaction as they would if they opened Retail stores, or other out of channel sales methods.

Why then do companies open International markets without paying full multi-level commissions? In my experience there are six basic reasons:

1. Implementation costs: The cost of creating a computer system to process these commissions.

2. Higher commissions: It can cause a specific International market to reach its maximum commission payout at lower sales.

3. Benefits few distributors: The view that very few distributors actually build International downlines, so a company creates a very expensive program in terms of payout and operations costs and the benefit accrues to very few people.

4. Commission plan de jour: The flexibility of being able to create a new commission plan to meet the needs of each International market.

5. Operational Horror stories: International plans that pay full multi-level commissions have been fairly common since 1990. They do create operations problems for companies and they are pretty well known in the industry.

6. Different regions of the world prefer different commission plans: As a company moves its international expansion to regions where other commission plans are preferred, sometimes it is easier not to be burdened with fitting a new commission plan in with existing plans in other regions of the world.

What are the major methods of implementing International commission plans, basically this comes down to 5 strategies:

1. Worldwide seamless downline and commission plan: quite a few very successful companies have implemented this method of commissioning since 1990. Most of these companies have ultimately created some seams but most have retained the original intent.

2. Worldwide seamless downline with regional commission plans: This is the middle ground of saying a company will always pay a distributor on his downline but according to the commission plan where the product was sold.

3. Partial upline payment: This strategy pays commissions to a distributor who builds a downline in a new country, however payments to this distributors upline are limited to number a of generations that is less than the standard commission plan.

4. No International commission plan: A distributor is allowed to sponsor internationally if they are of a certain rank but no upline payments are made.

5. No International sponsoring allowed: A distributor is not allow to sponsor internationally unless they are a can prove residency or have created a legal entity in that country.

No specific method of International commission plan has become a de-facto standard; all of them create challenges for the company. Clearly most of the successful and fasted growing International companies of the last decade have used some form of the worldwide seamless downline. In the early 1990’s a seamless commission plan was very popular. However as you talk to the people in the companies that implement these plans it is the frustration of dealing with the economic realities of trying to make a single commission plan work in a world where per-capita-income is so widely varied is the issue that keeps coming up.

Summary

The important question is would these companies do it again? A solid majority of senior executives we have dealt with who have implemented these plans believe that if they had it to do over again they would do a seamless downline and some form of flexible commission plan strategy.

Why? Basically the reasoning goes like this, distributors build the downlines that create the international sales volume. When you have trained and effective sales leaders they drive the opening of new markets and the creation of sales volume in those markets. If you don’t have an international commission plan each new market is the same hit or miss proposition as opening the original company. With an in place International commissioning system each new market can build on the momentum of the previous markets that have been successfully opened.

So why not use the seamless/seamless strategy. Through hard experience companies have learned that other countries can not be treated as a 51st state issues like per-capita-income, business practices, even availability of door to door shipping means commission plans must be modified, not so much be geographical region but by economic region.

This does beg the question of why the option of allowing International sponsoring but paying limited upline generations has not been more successful. It seems that once a company steps out of the multi-level channel distributors lose interest, and this is viewed as stepping out of the channel.

Conclusion

There certainly are challenges with an international commissioning system, but I don’t think that blanket statements about increased costs of commissions are valid because commission costs are typically a function of qualifications and many companies do not completely, seamlessly, aggregate qualifications across the world.

In fact the only statement that can generally held to be true about seamless international commission plans is that it means a distributor can sponsor distributors in other countries under some set of rules, and they can receive full downline commissions under some set of rules. These rules have not formed into some standard; almost every company has created their own methods for dealing with the issues stated above. One thing that does seem consistent is the longer a company has an international commission plan, the more little seams appear.

The other statement that is also true is those companies that have created a successful international commissioning program can often track well in excess 50% of their sales to this program.