Understanding the Amway Compensation Plan
Understanding the Amway compensation plan isn't necessarily difficult, provided you do a little research and have a fundamental understanding of some basic marketing principles. Amway, and its sister business Quixtar, are business that work on a multi-level marketing (MLM) scheme. Often disparagingly called pyramid schemes, a multi-level marketing system requires each affiliate (the people who work for Amway) to recruit more people to work for him or her, who in turn recruit more employees. The money those people produce through product sales moves up to you, and the money you earn moves up to the people who recruited you.
This may seem like a good plan, but most MLM businesses make a lot of money for the people at the top of the pyramid while those lower down don't make much. When you figure out that most Amway affiliates make less than minimum wage (much less, in fact), and that most of what they "make" is in commissions on products they buy themselves, it starts to become confusing. The "real" money lies in recruiting people to become affiliates themselves. In fact, affiliates, or individual business owners (IBO's) as they are known, are often expected to put more effort into recruiting new people instead of actually working to sell their products. The majority of Amway IBO's do not earn the income they expected to earn.
Amway affiliates are compensated in two ways. First, they get a commission on the products they personally sell. Then they get a bonus for all the sales made by the people under them. This bonus can be as little as 3 percent or as much as 25 percent of the monthly sales value if you have several people under you. However, part of the plan is to "sell to yourself;" that is, to encourage IBO's to buy the products they then earn commission on. Furthermore, the company's products are high-priced, making them hard to sell to people outside the Amway/Quixtar organization.
Not much else is known about the actual formulae used by Amway/Quixtar to calculate commissions, because the company keeps such information secret. There are various levels of compensation, starting with the IBO. If an IBO makes the maximum bonus for a month, they reach the silver tier; if they make the maximum for three months, they qualify for the gold tier. To make it to the platinum tier, the IBO must make the maximum bonus for six months, which amounts to generating $30,000 in sales every month. To do that, an IBO must have a very deep business, meaning her or she must have many people under him or her, who in turn must each have many people under them, and so on.
The real money in Amway is in selling the motivational tools Amway has designed for the numerous events they hold, which are designed to pump up the affiliates and encourage them to meet sales goals. The tools and the events are expensive, and selling them to people who have already bought into the Amway/Quixtar model is quite lucrative, but only for the people at the top.
