The Binary Compensation Plan was developed in the 1990's making it one of the more recent plan types, and is very popular due to simplicity and even distribution.

The basis of the Binary Plan is having a limit of 2 frontline associates for any business center (as drawn above), hence the word "binary". Additional associates must be placed at the next level below.
This develops a supportive team approach in building organisations.

Balancing leg volumes is the chief focus in binary compensation plans: For example if you had 1200 sales points flowing through the right leg of your business but only 800 points flowing through the left, you will be paid out on the lower of the two (800).
This means associates have incentive to assist weaker downline members to build the organisation, balancing the legs and increasing their income.

There are normally no depth restrictions to the Binary Plan, so each business centre should be restricted to a limited maximum earning potential to ensure that both distributors and the company earn a profit.
For your serious network marketers the profitable part of Binary Plan is that although each business centre has an income limit, there is generally no limit as to how many business centres each distributor can operate. Once they have achieved a certain level where their organisation has maxed out or has limited earning potential, the company rewards the distributor with a new business centre.
The company benefits by having a successful distributor open a new business center while the distributor is happy realising a higher earning potential.

Studies conducted into the network marketing industry found that the average network marketing distributor sponsors between 2-3 new distributors into their business. This means it would be hard for the ‘average distributor’ to be successful using some of the older compensation models that required distributors to recruit at least 6 or more frontline distributors to see any return from their efforts.