Stairstep Breakaway refers to Multi-level marketing compensation plans featuring two types of distributors: managers and non-managers. Stairstep Breakaway is the oldest and most common type of compensation plan.

No matter what use term the company uses to call their sales managers: 'executive', 'platinum' or 'Regional Vice President', upon achieving a certain performance criteria, a distributor becomes a manager and "breaks away" from his or her original manager. The original manager loses his or her managerial overrides and, instead, receives a percentage override from the sales of the entire breakaway organisation.

Example

To see how a stairstep breakaway plan works, let us examine an actual compensation plan. Forever Living Products (FLP) is a grower and producer of a range of natural health, nutrition and beauty products based on aloe vera and honey. As per this table, FLP pays 32% of their SRP (Suggested Retail Price) (or 45.76% of their average wholesale price) to the hierarchy of distributors.

Advantages

According to Alfred White, senior management consultant of Hamilton, La Ronde & Associates, Inc., the chief advantage of stairstep breakaway plans is that it has a good track record, is easy to modify, is accepted by regulatory agencies, and is driven by volume and performance.

• The oldest and largest companies, like Amway and Tupperware use this compensation model.
• Inserting and removing ranks, such as supervisors, assistant managers or regional managers and national managers, is very easy to do.
• Changing percentages is very easy to do. Such changes may reward more distributors or may reward the fewer higher-level distributors.

Disadvantages

The chief disadvantage of stairstep breakaway plans is the tendency for inventory loading. Unless the company aggressively monitors them, distributors will tend to coach their subordinate distributors to amass inventory to gain rank.

Multi-level marketing