A Binary Schema for an MLM System

Ashfaq Rahman, Graduate Student, Computer Science Department, School of Engineering & Applied Science,
University of Pennsylvania, Philadelphia, USA
& Lecturer ( On Leave ), Computer Science and Engineering, BRAC University, Dhaka, Bangladesh
E-Mail: ashfaq@cis.upenn.edu
Shafquat Rahman, Lecturer, Computer Science and Engineering, BRAC University, Dhaka, Bangladesh
E-Mail: shafquat@bracuniversity.ac.bd
Mahmudul Islam, Graduate Student, School of CSSE, Monash University, Clayton 3168, Australia
E-Mail: sislam@mail.csse.monash.edu.au
Tanveer Ahmed Nasir, Metatude Software BV, The Netherlands, Dhaka Office
E-Mail: tanveer@metatude.com
Abstract :
This paper will introduce a model for an MLM ( Multi Level
Marketing ) System, also known as a Pyramid Scheme in many
parts of the world. This paper will discuss the system from a
business perspective with an underlying implication of the
information which is maintained and propagated within a binary
tree structure. The first part of this paper will introduce MLM.
Then it goes on to introduce a binary schema for an MLM system
and describes the system at length. The system has been under
successful operation for over 2 years with more than 1,40,000
distribution channels organized in its tree structure. The objective
of the research is not to instigate a debate on the efficacy of MLM
over traditional systems. Rather, the focus is to elaborate a
structure for the system and delve into the technical pros and cons
and their underlying computer simulation aspects.
Introduction
Every direct selling company that has reached the pinnacle of
success in today's competitive market began its business by
offering unique products or services that served a recognized
need. But quality products alone don't sustain a multi milliondollar growth pattern. By necessity, the company provides a solid
marketing concept and a compensation plan that offers the serious
minded distributor a significant financial opportunity. In addition,
it is critical to provide the part timer and consumer/distributor an
easy way to stay involved at their own specific levels of interest.
In addition, a competent management team and motivated
professional sales leaders will engender success. This is the very
essence of a Pyramid Scheme or Network Marketing or Multilevel
Marketing.
The main objective in MLM is to cut the advertisement cost and
make the buyers themselves work for the company. The consumer
himself/herself is the dealer or distributor of the respective
commodity or service and he/she will get benefit from sales of
his/her down-liners. Different network marketing companies
prepare their system following tree structures of different arities.
Among them binary trees provide the most intricate formulation
of the marketing plan.
As an example a 250 ml Coke costs 5 cents. But the market value
is 40 cents. The extra cost can be credited to a large part to
advertisements. Thus the MLM system reduces this huge cost
overhead by self-advertisement, where the product is propagated
down a tree like structure.

MLM was first introduced by Dr. Carl Rehnborgh in 1940-41 and

was internationally recognized at US parliament in 1958. Over
12000 MLM companies around the World in more than 125
countries are involved in MLM business.
Advantages of MLM over Traditional Systems
MLM has constituted Over 50 Billion US dollars industry
Worldwide and also been regarded as one of the most effective
ways to reach consumer today.
1. MLM can establish a direct marketing system between
customer and manufacturer and in the process, eliminates most
overhead cost on retailing products. MLM is one of the viable
ways for an inventor or manufacturer to put a new product on the
market without having a million dollars and without having to
totally give up their product to someone else.
2. No showroom is required to sell the products and services to
end-user. Word of mouth advertisement system is used to attract
the consumers.
It combines 2 powerful forces at work,
Networking and Marketing.
3. Consumer also gets profit share from his/her purchase after
joining the network, thus developing a residual type of income for
life. The very essence is to generate a lucrative secondary income
without quitting the full-time job and also to create income
opportunities for unemployed people.
4. Network marketing is not a full time commitment and there is
much greater flexibility. The distributor can work anytime,
anywhere and no experience is required. MLM can be a great
additional income option for better life-style.
5. Unlimited income options and provisions for sure replacement
makes MLM a Freedom Enterprise.
M

Company & Distributors

25%

&

75%

Figure 1: Multi Level Marketing

Vs Traditional Marketing

In fig 1, the path MAWRC indicates traditional ways of

product distribution from manufacturer M to consumer C. A, W,
R stand for broker commission, showroom cost, advertisement
cost, many middlemen etc. In an MLM system, A, W, R are
replaced by the rectangular box representing an MLM company
and its distributors. MLM distributes the products directly with
the help of consumer distributors who get the profit share. In
Figure 1, the company gets 75%, whereas the distributors get 25%
of the profit.

4. Any person entering into the net can have dealer only and
dealer with product status. The distinction being that for a
person with dealer only status, the up-liners dont get any
points. Each person who buys a product and becomes a dealer, is
assigned 1000 points.

A Binary MLM System

The binary schema that is being followed by an operational MLM
company is discussed below with full functional details. The
motto is to increase the sales volume and aggregate profit by
offering commission and benefits to serious distributors as per
their sales performance. The binary tree grows as more people
join the net.

Basic Premises

The MLM system has been devised under the following premises.
1. There is more financial freedom in having a business of ones
own than working for some one else.
2. Average people are not capable to start their own business due
to lack of capital and proper knowledge!
3. But if someone can have a capacity of Tk.5,000/- as capital to
start MLM business, the company can help him start his own
business in his spare time and pave the way to self employment
and financial freedom.
Financial commitment and social commitment are the two key
issues behind the evolution of this MLM system.
Illustration of the Pyramid Scheme
1. Anyone starting the business will get a business center for each
1000 points ( or 500 points in the new marketing policy ) worth of
products he purchases.
2. To earn commission from the business center, there has to be
sales points on each side of the business center ( Left Sales
Volume LSV and Right Sales Volume RSV ).
3. When the new incoming distributor sells products or sponsors
some customers, he/she will earn commission.

Pool

DIN

For example, the tree in Fig 2 is represented in Table 1

A
B
C
D
E
F
G
H
I
J
K
L

Dealer with product

Dealer only
Dealer with product
Dealer with product
Dealer with product
Dealer only
Dealer with product
Dealer with product
Dealer with product
Dealer only
Dealer with product
Dealer with product
Table1: Distribution Center Status for
the Tree in figure 4

Left side Points for A = points for D, E, H, I = 4000

Right side Points for A = points for C, G, K, L = 4000

DIN

SP

SP

1000
LCT

Figure 2 : An MLM System

Business
Center
(1000)

LSV

RCT

RSV
Figure 3: A Business Center

1000

Business
Center
(1000)

1000

1000

Figure 3: A Business Center with commission

from sale points on each side. 1000
points for each center

Business
Center
(001)

6000
Tk. 7,200/-

500

500

500

500

500

6000

500

500

500

500

500

500

500

500

500

500

500

500

500

500

500

500

500

Figure 4: A Business Center with commission from sale points on each side.
500 points for each center
Similarly, for others,
Node
B
C
D
E
F
G
H
I
J
K
L

Left point
2000
0
1000
1000
0
0
0
0
0
0
0

Right point
2000
3000
0
0
0
2000
0
0
0
1000
0

Table 2: Point status of nodes for the

Tree in Figure 4
The commissions are awarded as follows
Level
Left
Right
Commission
point
point
1
1000
1000
1200 Tk
2
2000
2000
2400 Tk
3
4000
4000
4800 Tk
4
8000
8000
9600 Tk
Table 3: Commission offered to the
distributors

5. After 4 levels are completed the dealer is said to have

completed 1 cycle and he starts again from level 1.
6. The system here is dependent on balanced binary tree. If a
dealer has completed a cycle with 15000 points on the left side
and 20000 points on the right side then the extra 5000 points is
flushed. So no points can be carried over to a new cycle. Whereas
within the cycle on individual levels, extra points are carried over.
7. A distributor can buy points and add to his total pool points to
conduct his business profitably. He can also distribute points from
his pool to his left and right so as to create a balanced subtree with
a view to maximizing his own profit.
8. A business executive earns special incremental incentives when
his business center earns 4, 8, 16 cycles of commissions.
In our example,
A completes levels 1 and 2.
B completes level 1 and has 1000 points on each side left and so
on.
The values for commission, incentive and points awarded for each
center are subject to change. The values used here represent the
company policy. The point values and commission amounts can
be changed anytime. However, it is wise to maintain an equitable

compromise between company profit and benefits awarded to

distributors.
Strategies to run a successful MLM business
MLM can be considered as a scheme where people are paid only
on the distribution of valuable products or services. The MLM
company and the incoming distributors have to take into
consideration the following salient points to sustain the system.
1. Capital:
Cost of new distributor entry sales kit should be modest, making it
easy to get started. A very small amount of capital will suffice.
2. Products and Profit:
The marketing of a product can be based on some criteria i.e
whether the product is meant for personal use or home use, resale
value or shelf value of the product, product demand already exists
or can be created, necessary training and knowledge on the
product which will be distributed within the tree structure,
affordable price and available delivery.
The actual profits are calculated on:
l

retail value(cost value + handling charge +

damage + VAT) = actual profit.

l The points are given to on actual profits, and each time a

distributor can accumulate a min 500 points, he can ask
for a business center.
3. Work Plan:
The distributor member has to work few hours every week for 2-3
years. The dimension of work includes sharing the concept,
homework to update, contacting the team distributors, attending
the training etc.
4. Training
The distributor has to have the basic training of the system to
operate the business, which involves study of the Application and
Agreement Form, study of the sales and marketing plans, product
and price-list, study of the MLM training books and news,
attending the MLM group meetings and training.
5. We Feeling

show the big opportunity plan,

sit down with active skilful up line(s) for making a time
plan and a working plan.
activate the working plan and work for few hours
everyday than huge hours one day!
He has to learn first how to accept the rejection 500
times, even before he can succeed in his project.
The ultimate motto for him would be to duplicate himself
and develop down-line leaders.
He has to further explore new area and expand his
network.

Present status of the MLM System

The Marketing company running with a binary MLM scheme has
40 net offices as sales outlet. Till date, there have been 1,41, 910
distributors in the system at last count. These distribution
channels are organized in a binary tree of height 105.
The MLM company has joint ventures with local industries. As
has been found, the MLM company has to give away a
commission of 80% of its total revenue. The high rate of
commission encourages a tremendous number of new distributors
to join the system every week, creating a huge sales volume for
the products. The snapshot of the system at time of last statement
generation is given in Table 4.
Conclusion
The very essence of an MLM system is to offer commission and
incentive opportunities. An organized way to do this is to
propagate the commission values throughout the distribution
channels in a tree like structure. The greater the pay, the greater
will be the number of people attracted to become new marketing
distributors, thereby flourishing the MLM system. A binary
scheme for the tree has been proposed and its operational nitty
gritty have been explained at full length. The next course of action
would be to analyze the sustainability of the system and generate
data structures, algorithms and techniques for an equitable
computer implementation, thus necessitating a robust computing
research and development.
References
[1]. The Marketing System of Destiny 2000 from Destiny 2000
Ltd.
[2]. http://www.mlm.com
[3]. The MLM Simple Success Guide: Dr. Dean Black

The incoming distributor has to be associated with the sales team

all the time and follow the instructions from up line. He has to
stick with one concept and one team.

[4]. The ABCs of MLM by Gerald P. Nehra.

To sum it up,
In order to build a BIG Network Business, a distributor member
has to

[6]. The New Matrix Commissions Plans & Commission

Plans that Ignite Distributor Behavior : Book Chapters by
Mark Rawlins.

get the necessary training of the system,

make a quick-list of the people he knows,
contact and invite one person a day,

[5]. http://www.usana.com

[7]. Book Review Understanding Multi Level Commissions and

Their Role in a Successful Company by Lerory Ball.
[8]. Binary Search Trees : How Low Can you Go ? Rold

Fagerberg, Department and Computer Science, Odense

University, DK-5230 Odense M, Denmark.

Unique Binary-Search-Tree Representations and Equality

Testing of Sets and Sequences : Rajamani Sundar and Robert
E. Tarjan.

[9]. Optimal Rebalancing of Binary Search Trees by Rolf

Fagerberg, Department of Mathematics and Computer
Science, Odense University, Denmark.

Acknowledgement

[10 SIAM Journal on ComputingVolume 23, Number 1 pp. 2444 1994 Society for Industrial and Applied Mathematics

Special thanks to Mr. Rafiqul Amin along with the other directors
of Destiny 2000 Ltd for letting us develop and implement the
MLM system.

A Snapshot of the MLM system at last count

TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------1
1
1
91
0
2
2
2
97
0
3
4
3
0
0
4
8
4
220
3
5
6
5
220
6
6
12
6
42
20
7
22
7
197
26
8
35
8
112
30
9
47
9
210
45
10
77
10
289
56
11
124
11
94
73
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------12
185
12
259
118
13
297
13
188
156
14
407
14
247
186
15
555
15
250
218
16
717
16
265
276
17
852
17
320
384
18
1017
18
211
499
19
1257
19
204
618
20
1503
20
330
739
21
1734
21
215
881
22
1970
22
390
959
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------23
2226
23
318
1127
24
2472
24
248
1294
25
2757
25
214
1425
26
2989
26
224
1547
27
3292
27
267
1738
28
3592
28
305
2004
29
3869
29
275
2207
30
4082
30
261
2357
31
4345
31
266
2367
32
4620
32
263
2338
33
4708
33
249
2463
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------34
4789
34
289
2571
35
4757
35
234
2590
36
4733
36
201
2653
37
4774
37
254
2650

38
39
40
41
42
43
44

4741
4573
4643
4600
4378
4211
4102

38
39
40
41
42
43
44

213
148
173
167
198
95
115

2609
2725
2706
2445
2434
2349
2185

TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)

---------- -------------- ---------- ---------- ---------------45
3983
45
70
2089
46
3735
46
74
1899
47
3567
47
89
1857
48
3394
48
72
1548
49
3085
49
52
1289
50
2664
50
67
1163
51
2310
51
49
1036
52
2022
52
35
1013
53
1788
53
32
912
54
1665
54
20
871
55
1567
55
18
686
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------56
1376
56
14
581
57
1184
57
18
509
58
1009
58
9
429
59
878
59
10
373
60
735
60
8
338
61
665
61
8
304
62
579
62
5
251
63
518
63
3
213
64
458
64
2
165
65
383
65
1
167
66
338
66
38
125
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------67
256
67
25
88
68
210
68
12
91
69
170
69
5
70
70
140
70
5
63
71
124
71
14
59
72
117
72
4
80
73
121
73
1
85
74
129
74
1
71
75
114
75
3
63
76
97
76
3
64
77
95
77
7
66
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------78
93
78
8
67
79
88
79
29
62
80
86
80
12
72
81
94
81
8
88
82
107
82
7
77
83
103
83
5
88
84
115
84
5
100
85
127
85
8
94
86
124
86
8
68
87
106
87
4
85

88

109

88

110

TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)

---------- -------------- ---------- ---------- ---------------89
125
89
0
103
90
152
90
2
95
91
151
91
1
76
92
137
92
1
66
93
127
93
0
71
94
115
94
1
47
95
90
95
1
37
96
66
96
0
40
97
60
97
0
20
98
42
98
0
17
99
41
99
0
13
TREE_LEVEL COUNT(CID_NUM) TREE_LEVEL SUM(CYCLE) SUM(CYCLE_LEVEL)
---------- -------------- ---------- ---------- ---------------100
23
100
0
17
101
32
101
0
6
102
28
102
0
4
103
19
103
0
1
104
6
104
0
1
105
3
105
0
0

Table 4 : A real snapshot of an operational MLM Tree