Flat Commission Referral System for Equitable Reward Distribution
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Solution Overview
Problem
Existing referral marketing systems are complex and often favor early entrants or those with large followings, leading to financial losses for the majority of participants, and are viewed with suspicion due to deceptive practices, necessitating a simpler and more equitable reward structure.
Innovation Solution
A referral marketing system where customers pay an additional fee for referral keys, allowing them to recruit others, with a predetermined formula calculating membership fees based on product price, number of referrals, and incentive level, providing a clear and achievable reward structure without multi-level marketing hierarchies.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If multi-level marketing reward programs are implemented with complex rules and reward hierarchies, then early entrants and those with large followings can obtain significant rewards, but the vast majority of participants lose money and the system becomes difficult to understand
Solution Approach 1:
The patent segments the referral system into simple, discrete components: a flat commission structure where each referrer receives a fixed percentage (e.g., 10%) of referred sales, independent of hierarchy level. This eliminates complex reward hierarchies and makes the system easy to understand while ensuring fair rewards distribution across all participants.
Solution Approach 2:
Instead of the traditional MLM approach where rewards diminish with each level and favor top participants, the patent inverts the structure by implementing a flat commission model where all referrers at any level receive the same commission rate. This inversion ensures that participants further down the referral chain are not disadvantaged, making the system equitable for the majority of participants.
2Ease of operation
If referral systems use complex reward hierarchies to motivate participants, then some early entrants can earn significant benefits, but most participants find the benefits difficult to achieve and lose money
Solution Approach 1:
The patent breaks down the referral reward system into simple, achievable segments: each participant can earn commissions from direct referrals and potentially from referrals of their referrals, with a fixed commission structure. This segmentation makes the referral process simple to operate while maintaining reliable reward achievement probability for participants.
Solution Approach 2:
The patent changes the key parameter of commission structure from hierarchical (varying by level) to flat (constant across all levels). This parameter change ensures that the ease of operation is maintained while significantly improving the reliability of reward achievement, as participants know exactly what to expect regardless of their position in the referral network.
3Reliability
If existing referral systems implement multi-level marketing structures, then some participants can obtain financial rewards, but the systems are viewed with suspicion due to deceptive practices and regulatory limitations
Solution Approach 1:
The patent inverts the traditional MLM approach by eliminating multi-level hierarchies and implementing a flat commission structure. This inversion removes the deceptive elements and regulatory concerns associated with complex MLM systems, thereby increasing participant trust while reducing regulatory compliance complexity.
Solution Approach 2:
The patent changes the structural parameter from multi-level hierarchy to flat structure, and changes the commission parameter from variable (by level) to constant. These parameter changes align the system with regulatory requirements and ethical business practices, improving participant trust while simplifying regulatory compliance.
Data Source
AI summary
An electronic distributed computing system connecting both merchant and customer devices implements a referral marketing program that rewards customers for recruiting other customers to purchase products from the merchant and join the referral marketing program. A customer uses an application to purchase a product or service and is invited to join the referral marketing program. The customer is optionally invited to select an incentive level and a target number of recruits. After paying a referral program fee that varies based on the cost of the customer's purchase, the incentive level, and the recruiting target, the customer obtains the targeted number of electronic referral keys. The customer provides these referral keys to recruited customers in exchange for a predetermined resale program fee. The recruited customer can redeem the referral key to join the referral marketing program and obtain their own referral keys, after making a purchase from the merchant.