People interested in network marketing in the Philippines keep hearing about the dangers of “kamada”, and how it can harm MLM companies that are offering binary compensation plans.
Does anyone have the numbers to prove it? What happens if we simulate it via an Excel spreadsheet? Let’s see…
Let’s say a product is worth P7,000 and if you manage to directly sell that product to a dealer, you will earn a direct commission of P500 while the person who sponsored you earns P350 in commissions.
Let’s assume that you’re the only one directly recruiting people. Based on this, for every person you recruit, the MLM company pays out P850 in commissions (500 + 350).
In a binary system, if we take take your point of view (and you’re at level 1), then there will be two people in your Level 2, and 4 people in your Level 3, and so on…
Let’s assume you are such a star Pinoy MLM networker, that you are able to build a perfect binary matrix (kamada). Meaning, you’re able to fill up all the slots in your network.
In your Level 2, you have recruited two people. They form a pair, and therefore you earn P1,500 for that pair (P1,500 x one pair). Let’s call this the Pair Commission.
In your Level 3, you have recruited four people (there will be two people each under your Level 2 recruits). Your pair commission will be P3,000 (or P1,500 x two pairs).
In your Level 3, notice that your Level 2 people each have a pair under them. So each Level 2 person will earn a Pair Commission of P1,500 for a total of P3,000.
Total Pair Commissions Paid Out On Level 3:
To You – P3,000
To Level 2 People – P1,500 x 2 = P3,000
Grand Total Pair Commissions = P6,000
If you keep growing your network, and if you feed the numbers into an MS Excel spreadsheet, you will see that in order to reach a point where the total commissions paid out exceed the total cash inflow would be at Level 10.
In other words, you will need to build a network of 1,023 accounts on your own (KAMADA). Can you imagine how much cash you need to set aside to do this?
Try at least P7.0 million (and to earn what, P250k or an ROI of only 3.5%, plus a thousand boxes of the product?) It is not worth the effort.
That’s why I don’t get it when some Pinoy network marketers look solemn whenever they say the word “kamada.”
