Want to learn about MLM Stacking? You are at the ring place. If you have some experience in MLM, you must know the importance of a compensation plan. There are numerous compensation plans but they all have the same purpose. Firstly, they define how a distributor will be arranged in the MLM network and secondly, it decides how the compensation will be distributed across the downline.
As you can see, a compensation plan is a fundamental aspect of an MLM business and without it, MLM companies cannot function. But why are we talking about Compensation plans? Because MLM Stacking which is the topic of this post is directly related to compensation plans. MLM stacking is an unethical practice that aims to manipulate the downline with fake distributors and make extra cash.
It exploits the innate working of a compensation plan and introduces fake members in the genealogy tree to receive more compensation.
This manipulative strategy could be detrimental to MLM businesses and can put a serious dent in their profits. That’s why it is crucial to understand MLM stacking and its negative effects on the business. Let’s explore MLM attacking in more detail.
What is MLM Stacking?
MLM stacking usually refers to the practice of adding fake distributors in a downline. This manipulation is carried out to add extra levels in the downline where commissions are distributed across different levels. In most cases, a genuine recruit is placed underneath the fake ones.
When the genuine distributor makes sales, a part of the commission goes to all the fake distributors, often tied to a single person, thus profiting his manifolds. The compensation plans that involve multiple levels of payout like Unilever are more prone to MLM stacking.
As an individual considering getting into the MLM business, it is vital to thoroughly research the company. Moreover, it’s prudent to consult an MLM expert to ensure that the network you are considering is not plagued by MLM stacking.
In an MLM, how does stacking happen? ( Complete Process)
Well, MLM stacking is an unethical practice that can seriously undermine a company’s ability to make profits. But how does it actually happen? Let’s understand the process of MLM stacking.
Stacking begins with a compensation plan that pays distributors on multiple levels. Let’s take the example of the Unilevel MLM plan. It involves several levels and when a sale is made to downline members, anyone above that member in the downline also receives a commission. This is where the manipulation happens and MLM stacking comes into play.
Let’s understand it with an example;
Suppose Member 1 joins an MLM network that follows a compensation plan with level-based commission payouts.
Let’s say Member 1 adds four new members in the downline – Member 2, Member 3, Member 4, Member 5. The plan pays 5% to every sale made by the downline members to the person above in the downline.
Say, Member 5 makes a sale of $100, and a 5% commission goes to each member above him. Our Member 1 will also receive $5 as commissions. That’s fair and square, but let’s assume that Member 1 gets creative or greedy, whatever you can say. He replaces Members 2, 3, and 4 with fake distributors like his wife, brother, and sister.
Now let’s repeat the scenario;
Member 5 makes a sale of $100. The 5% commission goes to every member in the upline. But in this case, the major beneficiary is member 1. Why? Because he will receive the total commission of 20% ( 5% of his own and the rest of 15% from his wife, brother, and sister). So, without making any extra effort he will make $20 Instead of the original $5.
It might appear an alluring idea for a distributor; why make just 5% when he can make 20%? While it might appear profitable to some extent the downline is bound to collapse. Fake distributors won’t be putting any effort into the business, sales will dwindle eventually and commissions will dry out.
Why is Stacking in MLM Dangerous?
It might be apparent to you now that stacking in MLM is a dangerous practice. It is manipulative, destructive and most importantly restricts the flow of profit to a few individuals who squeeze the system and leave nothing for others. But how dangerous stacking can be? Let’s have a detailed breakdown;
Stacking Leeches away the profits from the upline
One of the immediate dangers of MLM stacking is that it can deprive the upline of its commissions. Let’s take the example of Member 1 from above, where commissions are paid out to 5 levels.
If he was working ethically, his downline would have been active and the commission payout could have gone to his upline too, let’s say Member A. But since Member 1 has already stacked the levels with fake distributors and added a genuine one below them, sales commissions end up in Member 1’s pocket only. Member A won’t receive anything.
Stacking demotivate the MLM network
Commission is the driving force behind member’s activity in an MLM network. But in MLM stacking only a few distributors keep all the commision and several in the upline receive nothing.
No commission can easily demotivate members and they might stop putting the effort to grow the network and bring more sales. Furthermore, if stacking incidents come to light, it will significantly discourage the network members and they might leave the company too.
Stacking Will Encourage Others to Follow the Same Practice
When other members see people manipulating the compensation structure and making money, it is bound to encourage some to try it out themselves. This could start a trend and put most of the members in pursuit of easy money, even at the expense of the company’s profitability and growth.
MLM stacking is a dangerous practice, one that could trample the network structure. It could seriously impact a company’s growth prospects and several impact its revenue. Although Stacking may bring profit to a few, the larger picture is always considerable losses both for the members and the company. That’s why it’s crucial for MLM companies to consistently monitor their network and curb any stacking attempts before they can impact business growth.