Holding Tank in MLM: Revolutionize Direct Selling Team Structuring

One of the key ways to boost a company’s growth is to empower distributors and increase their earnings. For this, you must provide them with complete control over their team structure.

When your distributors recruit new members, it’s assumed that they’ll be placed directly under them or in the next available spot. Why’s that? Why can’t a recruit be placed anywhere else in the downline? Perhaps, they are perfect fits for other spots in the downline.

That’s where the concept of the MLM holding tank is introduced. Although it’s a significant feature of modern MLM, it has not been explored widely.

In this article, we’ll uncover the complete operations of a holding tank, explain its functioning, key benefits, and show you how to implement it in your MLM business.

What Is a Holding Tank in MLM?

Consider a holding tank as a temporary space in your MLM software where new recruits are placed before being permanently positioned in the genealogy tree. Here, instead of placing distributors at default spots, they stay in the holding tank for a defined period (let’s say, one week), and then their respective sponsors decide their spot in the genealogy tree.

This feature provides team leaders with the flexibility to plan their MLM team structure strategically.

Here comes an example for your better understanding.

There’s a distributor, Sam, working for an MLM company that follows a unilevel model.

Sam recruits three new members: Ally, Kane, and Jose. Without the MLM holding tank, these new members will be placed at the first level, directly under Sam. These recruits' enrollments will be placed at the second level, and so on.

So, it will increase the first level’s width for Sam.

If we look at Sam’s current team structure:

• There are already eight active distributors at the first level.

• There’s moderate growth at the second level.

• The third level is quite weak, and there’s not enough GV for deeper-level payouts and matching bonus qualification.

Now, what does Sam want to achieve?

• Maximize the matching bonus that’s paid up to the third level.

• Improve the third-level generational bonus amount.

Team structuring does help in achieving these targets.

When holding tank concept in multi-level marketing business is applied, recruits will be placed in a temporary space.

Assume that the holding tank period is one week. Once the week is over, they are placed in the genealogy tree automatically as per the rules, if the sponsor doesn’t do it themselves.

So, Sam checks the performance of these recruits for the first five days and concludes:

• Ally is a strong salesperson

• Kane has an average performance, but there’s potential.

• Jose is mostly a consumer

Based on the conclusion, Sam applies decision logic:

• Ally is placed on the second level so that she can strengthen the third level and improve their earnings. It will help Sam qualify for the third level’s matching bonus.

• Kane is placed directly under Sam so that he gets coached directly by his sponsor.

• Jose was only interested in getting the product at a discounted price by becoming a member. As he doesn’t want to sell or recruit, Sam placed him at the third level. So, he can support in overall sales volume of the third level, without having any team building responsibilities.

So, that’s how a holding tank in MLM software makes an impact.

Types of Holding Tanks in MLM Software

Every MLM business implements a holding tank differently. According to what they want to achieve, they select the type of holding tank.

1. Basic MLM Holding Tank

As the name suggests, the Basic MLM holding tank is the simplest and straightforward one. After recruiting members, they are placed in the temporary space. Sponsor manually judges the recruits and decides their placement in the genealogy tree. It’s the best option for MLM businesses that want to provide team structuring flexibility to their distributors without making the process complex.

2. Advanced MLM Holding Tank

The advanced MLM holding tank works as an assistant to the sponsor. Recruits are first placed in the temporary space. Sponsor checks their progress manually. In addition to that, the system also learns about the member's behavior and aligns it with the sponsor’s genealogy tree.

It provides recommendations to sponsors regarding the placement of recruits. The sponsor can either go with the recommendation or manually place recruits as per their understanding.

It’s perfect for companies that want distributors to structure their teams freely but still make placement decisions with clear guidance and system-backed recommendations.

3. Automated MLM Holding Tank

The automated MLM holding tank gives complete decision-making power to the AI-based system. The recruits are placed in the temporary space, and when the holding period ends, they are automatically assigned to their genealogy spot. There’s no role for sponsors in such a holding tank.

This is the perfect option for MLM companies that onboard several members every day, and distributors have large teams. It’s also useful when you want to avoid human errors and make judgments purely based on data.

What Positive Impact Does the MLM Holding Tank Bring to Your Business?

There can be several ways in which the MLM holding tank can be put to use, bringing in several benefits for distributors as well as MLM businesses. Below are the key ways it delivers value:

• Volume Balancing: Distributors can place recruits in levels where more volume is required for qualifying for various bonuses.

• Rank Advancement Support: Recruits can be placed under distributors who need downline members to qualify for rank advancement. After the rank advancement, distributors will earn more commission, which will eventually improve the matching bonus for the sponsor.

• Strengthening Weak Legs: In the binary model, the MLM payout is usually made as per the earnings made by the weaker leg. For example, if the weaker leg earns $100 and the other one earns $180, the payout will be $100 for both legs. The remaining amount gets carried forward. When this difference increases, it can be demotivating for the stronger leg. This can be avoided by smartly placing the promising recruits in weaker legs to balance out the earnings.

• Leadership Development: If there’s a weak level in your downline, you can place the promising recruit as their direct upline. The recruit can coach and lead the weak level to improve their earnings.

• Commission Optimization in MLM: It is assumed that when the number of recruits in the first level is higher, the commission is maximum. But that’s not always true. While it can benefit the sponsor initially, smart distributor placement in MLM can help unlock deeper-level matching bonuses and maximize generational bonuses when MLM software compression is applied in the absence of any members.

• Improved Onboarding Experience: With a holding tank in multi level marketing, sponsors get time to connect with recruits, understand their strengths, weaknesses, goals, and availability, and provide them with tailored training before adding them to the team.

• MLM Downline Management: Without a holding tank, all the training, mentorship, and performance tracking load falls on the sponsor. With it, sponsors can strategically place new members across the genealogy and distribute the mentorship responsibilities throughout the team.

• Building Unilevel Plan Depth: Sponsors can place new members deeper in the network to create solid generational volume and strengthen long-term payouts.

How to Design MLM Holding Tank Rules?

For the effective functioning of the holding tank in MLM software, you need to set defined rules. Along with flexibility, you also need to ensure fairness, holding tank compliance, and smooth team building. When predefined rules exist, they eliminate confusion and prevent misuse. So, what are these rules? Let’s go through them and find out.

1. Define the Locking Period

This is the first element that you need to decide on. You need to choose how long a new recruit can remain in the holding tank before they are automatically placed in the genealogy tree. Common ranges include 24 hours, 3 days, 7 days, or up to one payout cycle. If you offer a weekly payout, it’s advisable to keep recruits in the holding tank for a shorter period.

2. Specify Who Has Placement Rights

You must clarify who can perform the placement: direct sponsors, upline leaders, or company admins. Usually, only direct sponsors are allowed to do the placement to avoid disputes and maintain fairness.

3. Set Clear Positioning Restrictions

While the network marketing holding tank offers flexibility, it also makes the MLM system vulnerable to fraud. Positioning restrictions help you avoid system exploitation. For instance, placing a limit on the number of people who can be added to a particular downline so that sponsors don’t put several strong recruits under one distributor in exchange for monetary gain.

4. Set Auto-Placement Logic

The MLM software must be capable of placing the recruit in the genealogy tree automatically when the holding period ends. However, you need to set a logic behind it. The simplest logic could be placing recruits directly under the sponsor. If you want better decision-making, the software must match the distributor's behavior with the sponsor’s team. Based on the requirements across the downline, the MLM software will do the placement without human intervention.

5. Implement Compliance Controls

It’s necessary to make sure that artificial manipulation doesn’t violate FTC’s direct selling guidelines. If holding tank favors one distributor and causes loss to others, that’s also considered a red flag. So, while deciding on MLM holding tank compliance controls, match the positioning restrictions with your compliance policies. If you see any between the two, modify the rules and ensure every activity comes under compliance controls.

6. Offer Optional System Recommendation

This is similar to auto-placement logic but before making the placement, system shares recommendations to the sponsor. Sponsor can go through the recommendations and approve the placement. They can also make the distributor placement in MLM manually as per their understanding.

The Common Challenges of Multi-Level Marketing Holding Tank and How to Overcome Them

Integrating MLM software holding tank functionality can be quite challenging. While it does give distributors more flexibility, it also raises a few important concerns that need careful attention.

1. Incorrect or Poor Placement Decisions

Once a sponsor makes a placement decision, there’s no going back. After the recruit gets added to genealogy tree, you can’t allow the sponsor to bring them back to the direct selling holding tank and reverse the decision.

Solution: Decisions must be made with AI-driven insights. Sponsors should also be able to place a particular member at different spots and check the impact on genealogy tree for each spot.

2. Slowed Down Team Growth

When sponsors wait too long to place the recruits in the genealogy tree, it can delay onboarding and slowdown the momentum.

Solution: You must set reasonable locking period, which are not longer than one payout cycle. Encourage sponsors to take quick mentorship calls and use automated suggestions for faster placements.

3. Overwhelming Workload for High-Volume Recruiters

When there are several recruits every week, it becomes impossible for sponsor to check each distributor’s performance. They can’t manually find the best spot every time. Because of that, the recruit has to stay in the temporary space till the end of locking period.

Solution: Provide distributors with auto-assign functionality where system chooses the best genealogy spot for new members. They don’t need to wait till the end of locking period and it gets done when system obtains enough data to make the decision.

Key Takeaways

The Holding tank in MLM software might look like a minute feature. But it empowers leaders by allowing them to structure their team the way they want. It helps more people to qualify, improve commission and bonus amounts, and works as a retention method.

However, you must ensure setting the rules right. The locking period, the placement restrictions, and compliance controls, every element must be backed by insights. Also, keep yourself open to continuously improve the holding rules until you find it’s best version.

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