The world of multi-level marketing (MLM) is home to a variety of strategic business models, each offering a unique approach to recruiting and compensation. These include matrix planning, also known as forced matrix planning, known for having a fixed depth and width structure. The purpose of this article is to study the nature of the matrix scheme, clarify its mechanism of action and its place in the legal field.
Understand the mechanics of matrix planning
Matrix plans follow a predefined structure, usually characterized by "width" and "depth" parameters. Take a 3x9 matrix plan as an example. In this setup, a distributor can directly recruit three other distributors that are marked as tier one. The structure continues in nine stories and forms the "depth" of the plan.
When new employees are added, the system automatically places them down the distributor's downline. This automatic deployment continues until all positions are filled, promoting balanced growth across the dealer network.
The elegance of matrix planning
One of the attractions of the Matrix plan is its simplicity and fairness. Unlike other MLM models, mandatory matrix plans do not allow distributors to sponsor more entry-level employees than the "width" of their plan allows. This limit ensures that additional employees above the width limit are placed further down the distributor's bottom line, creating an environment of teamwork and balanced growth.
Legality of MLM Models and Matrix Plans
An important aspect of any MLM model, including matrix schemes, is its legal status. As with any legitimate MLM business, the legitimacy of a matrix scheme depends on whether it is based on selling a real product or service to the end consumer. Distributors earn revenue from direct sales as well as sales from distributors they recruit.
In contrast, pyramid schemes are illegal in most jurisdictions and profit primarily by attracting more participants to the scheme, with profits often unrelated to actual product sales. Pyramid schemes usually emphasize recruiting rather than selling products, and their products may have no real market value. It is important to note that a matrix plan, properly implemented and focused on selling real products, can be a legitimate and effective MLM strategy.
Global implications and conclusions
MLM models are subject to specific regulations in each country. Therefore, it is important to understand the regulations set by your country's governing body before getting involved in a matrix scheme or any MLM model. Matrix Plan offers a unique, balanced approach to MLM that focuses on equal distribution of new recruits and mutual growth.
However, it is important to be aware of the legal aspects of the model and ensure that it complies with the regulatory framework in your jurisdiction. The main thing is to focus on genuine sales, not to exaggerate recruitment and distinguish between legitimate activities and illegal pyramid schemes.
Appreciate the flexibility and automation of matrix planning
An often overlooked feature of matrix planning is the high degree of automation in staffing allocation. Once the initial "width" limit is reached, the system automatically places all new hires into the distributor's downline.
This automation ensures a fair and balanced distribution of new members, making it easier for distributors to focus on mentoring new members rather than managing their place in the structure. This will eliminate any possibility of favoritism or imbalance, further promoting the fairness of the program.
Challenges in matrix planning
While matrix planning certainly has its advantages, it is not without problems. One challenge can be the inability to control where new hires are placed down the line. This can leave sales reps feeling disconnected from new hires, making effective communication and mentoring difficult.
Additionally, distributors may struggle if they prefer to work closely with more people than first-level employees. However, these issues can be resolved through effective training and communication strategies that ensure all team members feel included and valued.
Matrix Planning: A Tool for Balanced Growth
A matrix plan is essentially a tool designed to achieve balanced growth. This sets the stage for an environment where success is the result of collective effort rather than individual strength. In an increasingly interconnected world, the importance of this approach cannot be overstated. Not only does this create a more level playing field for traders, but it also promotes the idea of shared success, which is highly motivating for new hires.
A final word on the legality of the matrix project
In general, the legitimacy of a matrix scheme or any MLM model depends primarily on whether it follows the principles of selling genuine products or services. As long as an MLM company focuses on actual sales to consumers and ensures that distributors are paid based on those sales, it can be considered legitimate. However, it is important to be aware of pyramid schemes masquerading as legitimate MLM companies. These schemes prioritize employment over sales and are illegal in most countries.
Author: Pooyan Ghamari, Swiss Economist