MLM - Step By Step - 3 Level Affiliate Chain
MLM can be confusing for new users. Commission plans with different levels, affiliate groups/types, payment amounts, and other settings can quickly become very complicated. The aim of this guide is to cut through the complexity and get right down to the core of MLM affiliate commission plans. We will show you how to set up 3 levels of affiliate, for whom extra commission will cascade up the chain.
When a purchase is made, the affiliate it belongs to, for the duration of that calculation, will be referred to as Level 1. The levels above it in the referral chain will correlate with the increasing level number (2, 3, ...10). For this example we will set up the following rules:
- Level 1 will receive a basic commission of 10% on a purchase;
- Level 2 will receive a 5% commission;
- Level 3 will receive a 3% commission.
See below the three commission plans we will need to set up to enforce the commission chain.
Level 1 Plan
This plan will ensure that any incoming purchase will provide a 10% commission to the affiliate it was sourced by. That affiliate, during the calculation, will be referred to as Level 1.
Level 2 Plan
This plan indicates that when any affiliate sources a purchase, a 5% commission will be given to the level above them. Remember, the affiliate who received the purchase is Level 1. So the level above is Level 2 - the affiliate who will receive this 5% MLM commission.
You can also think of this as commission for the parent - "When someone makes a purchase at my store, I give my dad 5% of the profit.".
Here we tell the plan that it acts upon Level 2 affiliates.
Level 3 Plan
This plan indicates that when any affiliate sources a purchase, a 3% commission will be given to their Level 3 counterpart. As the source affiliate is Level 1, the affiliate 2 levels above them receives the commission from this plan.
You can also think of this as commission for the grandparent - "When someone makes a purchase at my store, I give my grandmother 3% of the profit.".
Here we link the plan to Level 3 affiliates.
Commission Plans Overview
Now that all of your commission plans have been created, you should be able to see the following setup on the commission plans dashboard.
Affiliate Referral Chain
Three affiliates have signed up. We will call them A, B, and C.
- A signed up originally;
- A referred B;
- B referred C.
Now we have our 3 level commission plan set up. We also have 3 affiliates who are ready candidates to receive purchases. By making a test purchase of $100 on our affiliate C, we can see the effects of the commission plan as it runs up the chain.
Here we can see that our commission plan has taken full effect. The purchase was made on affiliate C for $100. The Level 1 plan kicked in and gave him 10% ($10). Next, the Level 2 plan kicked in. The Level 2 plan gave 5% ($5) to C's parent, B. Finally, the Level 3 plan kicked in. This gave 3% ($3) to C's grandparent, A.
As a result, a total of $18 dollars has been paid out as a result of one purchase, divided into the commissions of three affiliates.
- C acted as Level 1, which can also be considered the child;
- C received a 10% commission, as per our Level 1 plan;
- B acted as Level 2, which can also be considered the parent;
- B received a 5% commission, as per our Level 2 plan;
- A acted as Level 3, which can also be considered the parent;
- A received a 3% commission, as per our Level 3 plan.
So, what would happen if we made a purchase on a new affiliate, named D?
If our new affiliate D was referred by C, they would belong to the same MLM chain. If D received a purchase, they would be treated as Level 1. Therefore C and B would be Level 2 and Level 3, respectively.