A profit sharing program is a risk/cost free marketing tool.

In short, a profit sharing program (PSP) is a multi-level affiliate program in which an affiliate receives a percentage from sales during the business life of the business (PSP organizer) according to the scheme he/she chooses.

In traditional marketing businesses should pay certain expenses in advance, for example, advertisement costs. If the advertisement will not generate additional sales, big enough to cover expenses and give the business additional profit, the business will lose all or part of the money spent. This is a risk incurred by the business.

In some non-traditional marketing, for example network marketing, the risks and costs are incurred by networking marketers. In this case, the new networking marketer must pay an old networking marketer (sponsor) for training or acceptance to the business This is the money he/she may loose.

A profit sharing program (PSP) is as risk/cost-free for a business as it is for a participant of the program. Instead of costs, the price for the business (PSP organizer) consists of sharing with a participant future profit from all sales in his sub-net of the participants. This is like a share in the business. So a PSP organizer's proposition is:he/she gives to the participants an opportunity to receive income from the business (share in the future profit), and in return he/she asks for recomendations of new customers. There are no risks/costs for the business or for the participants in this venture.

In some ways, a PSP is similar to affiliate/associate marketing, where affiliates/associates receive commissions from sales generated by customers they directly referred to the business (these are known as sub-affiliates or first level sub-affiliates). But the affiliates/associates do not receive income from customers referred by their sub-affiliates. (There are some programs, so-called two-tiers programs, where affiliates receive income from customers referred by them and their sub-affiliates, but do not receive income from customers on the third, fourth, and higher levels.)

For this reason, real money in affiliate/associate marketing can be earned only by affiliates which can recruit many sub-affiliates. For example, if an affiliate has a web site with a high traffic, then this affiliate probably will benefit from participation in the affiliate program. But if an affiliate has no a such site (as many people do not) he/she will earn almost nothing. For this reason, the majority of ordinary customers will not be interested in an affiliate program.

To stimulate customers to make referrals,the PSP organizer should give them an opportunity to earn more money. That is why PSP are always multi-levels programs. This gives the participants an opportunity to earn more income and gives them the feeling that they are being treated fairly by the business. Suppose a customer, John, referred a new customer, Bill. Bill referred a new customer, Tom, and Tom referred a new customer, Ellen. Now Ellen buys something. In the majority of affiliate programs, only Tom will be rewarded from this sale. In two-tier programs, Tom and Bill will be rewarded. The argument is: if Bill did not refer Tom, Tom would not referred Ellen, and there would not have beeen the sale. But the same argument may be applied to John. That is why a PSP will pay John, Bill,and Tom.

Opinion Reserch Corporation International (ORCI) found that users told an average of 12 other people about an online shopping experience, 8.6 additional people about favorite film, and another 6.1 people about a favorite restaurant. This is the dynamic that powers viral marketing.

It is similar to a nuclear chain-reaction. Suppose you have 20 customers. Each of your customers may refer five new customers, so you potentially have 20 x 5 = 100 new customers (first level sub-affiliates). Each of the first level sub-affiliates may also refer 5 new customers, so you potentially have an additional 100 x 5 = 500 new customers(second level affiliates), and so on. See table below.

Table1. Dynamic of the growth.

If you will give enough stimulus to your customers you may convert all these potential clients into real ones. The share in the future profit may be this stimulus!

A participant in an PSP receives income from sales of sub-affiliates up to a fixed pre-selected level (usually from 5 to 10). How big can a PSP's participant ncome be?

Suppose the PSP rewarding scheme is: 5% on the firsst level, 3% on the second level, 1% on the third and fourth levels. The PSP organizer pays 10% from sales to PSP participants. Let us suppose the average sale (ASale) per customer is $100 per month, and the average reference rate (ARef) is 5 per client. Under these assumptions, a participant has 5 first level affiliates, 25 second level, 125 third level, and 625 fourth level affiliates. The first level affiliates generate $500 sales, and $25 (5% from $500) comes to the participant. The second level affiliates generate $2,500, and $50 (2% from $2,500) comes to the participant. The third level affiliates generate $12,500 and $125 (1% from $12,500) comes to the participant. The fourth level affiliates generate $62,500, and $625 (1% from $62,500) comes to the participant. In total the participant will receive $850 per month.

In the table below are calculations of income for different parameters.

Table2. Income of a PSP's participant in dollars.

As we can see from these data, for a small fraction of profit (less than 10%), the PSP organizer may increase profit many times without any risks and costs.

You can estimate an income from participating in a PSP/AP/MLM using our calculator.

In addition to financial rewards, each PSP organizer makes his/her own contribution to the creation of the "economy of almost equal opportunities", where each person can participate in the profit of any PSP organizer without any risks/costs. It does not matter how rich or educated a participant is, where he/she lives, what he/she is doing. Everybody has relationships, therefore everybody can earn stable income from participation in the PSP.

It is true that the average person will not earn more than $100/month from participation in any one program. But in the "economy of almost equal opportunities" he/she may participate in many PSP programs as of businesses in the local community as far as of businesses in cyberspace/internet. So if a person participates in 100 different programs with $100/month from each one, the total monthly income may reach $10,000.