Usana: The Binary Pay Plan - Strength and Weakness

As Usana enters the Malaysia market in January 2007, here's a look at its pay plan.

Hi, In the early 1990s there were several hundred binaries in the USA. By the end of the decade all but a hand full had failed. The study that I financed back in the mid-90s examined information on two million networkers. Binaries had the worse earning ratio than any other compensation structure. Heavy hitters love the binary because it is designed to work for the heavy hitter that can enroll a ton of people and convince a great number of other networkers to promote the binary. If heavy hitters were smarter they would not promote a binary even through they can earn more for a while. In time the binary causes so much attrition that the heavy hitter doesn't earn as much as he could if he were in a better pay plan. We could have had a binary in 4Life but the members of the committee that designed the pay plan knew that binaries are not the best model. I have 39-years in this industry and Dave Daughtrey has more than 20 years. Several other members of the compensation committee have more than a dozen years. We all agreed that we have seen too much hurt generated from binaries. The first problem with the USANA binary is that you have a "dead zone" of $249 on each side before you get paid through the binary. This a potential of $498 in sales without you making a penny. The key is to remember that every new distributor isn't paid until $500 in balanced volume is accumulated. Think about it. Two, four eight, 16, 32, 64, 128, 256, 512, 1024 and it goes on and on. Here you have 1024 new distributors only seven levels deep that are not earning anything until $500 balanced. Five hundred dollars X 1024 distributors is $522,000 in unpaid volume at any one given time. When you visualized a binary think about one at the top and then two on the first level and then four and then eight on the third level. As you build you pyramid it gets wider and wider at the bottom which represents new people coming into the group. You have more and more people not earning anything until there is at least $500 in balanced volume. Why would anyone chose to not get paid on your first $498 in sales? Doesn’t make sense does it. Another problem is any volume above $5,000 is going to get flushed. Why lose chose to lose commissions on sales? You may have $25,000 on one side and flush $20,000 in sales. Personally I don't think very many people even heavy hitters really understand the dynamics of a binary. I think many heavy hitters are innocent and don't realize the flaws in it. All they know is that initially they can make more money faster. For the great majority of experienced and inexperienced networkers this isn't true. Why has there been a greater percentage of companies fail that use binaries than any other compensation model? USANA has done well as a company. For several years the leaders in the field kept things flowing. These leaders were very good promoters. They kept the average the network highly motivated. A few years back ten of USANA's top leaders left and join another company. Of course the spin was that they were leaving for a better opportunity and that they had conflicts with the USANA management. The reality was different than the spin. I had the privilege to analyze the genealogies of a couple of these super heavy weights. Their downlines were failing. The income was going down for some and for others they had to work more hours to keep the same pay. These leaders would never say that they were wrong about USANA or its pay plan because they were off to another binary. When a leader begins to have trouble with his income and attrition in his downline often he doesn't understand why. He thinks it’s the management or some other scapegoat. After 39-years of observation of this industry and the investment of 1/2 million dollars in research, I believe I understand this dynamic very well. In the USA it is very difficult to enroll individuals with 7-10 years experience into a binary. Newbies and heavy hitters that don't understand the true dynamics of a binary go for it. There is more to this story but it’s late and I believe I have shared enough of my opinion on the topic. Of course I respect each person's right to pursue whatever they believe is best for them. My opinion is just my opinion based on my observations and studies. I have test-marketed a couple binaries to examine its dynamics. My experience was in line with this perspective. I earn a ton of money quickly but my conscience wouldn't let me stay on that course. Mike

Source: http://www.professionalnetworkers.com/forum/viewtopic.php?t=3368