The direct sales and multi-level marketing (MLM) industry is rich with unique terminology that can often be overwhelming for newcomers and even for those with some experience. This comprehensive glossary is designed to provide clear, detailed definitions of the terms most commonly used in the industry, along with practical examples to illustrate these concepts. Whether you’re a budding entrepreneur, a seasoned professional, or someone interested in the mechanics of MLM and direct sales, this guide will help you understand the intricate details of this industry.
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Accumulated Group Volume
Definition: The total volume of sales accumulated by a distributor’s group from the time they join the company. This metric continues to accumulate and does not reset at the start of each commission period.
Example: If a team sells $200,000 worth of products from January to December, the AGV for that year is $200,000.
Accumulated Personal Volume
Definition: The total personal sales volume accumulated by a distributor from their start date with the company to the present.
Example: If a distributor personally sells $30,000 worth of products over several years, their APV is $30,000.
Active
Definition: A status indicating that a distributor meets the minimum volume requirements to qualify for commissions. Requirements can include personal and/or group sales volumes.
Example: A distributor must generate $300 in sales each month to maintain active status.
Affiliate
Definition: In direct sales, an affiliate is typically a person or entity that promotes the company’s products in exchange for a commission on sales.
Example: An online blogger becomes an affiliate to promote health supplements and receives a commission on sales made through their promotional links.
Autoship
Definition: A subscription model where products are automatically shipped to customers or distributors at set intervals, typically monthly.
Example: Distributors on autoship receive a monthly delivery of vitamins to ensure they never run out of stock.
Back End
Definition: The part of a compensation plan that provides commissions to distributors at higher levels of an organization, typically in stair-step breakaway plans.
Example: Senior distributors earn a percentage of sales from their entire downline as part of the back end compensation.
Bonus Volume
Definition: The part of a product’s sale price that is eligible for commission and bonus calculations.
Example: Although a product sells for $100, only $85 might count as BV for commission purposes.
Breakaway
Definition: A point in an MLM plan where a distributor advances from their sponsor’s team after achieving certain criteria, starting their own team and earning separate commissions.
Example: Once a distributor’s team reaches $10,000 in monthly sales, they break away to form their own independent unit.
Business Volume
Definition: Often used interchangeably with Bonus Volume, it refers to the volume considered for calculating commissions.
Example: If a distributor sells an item with a business volume of 75 BV, that amount goes towards their commission calculations.
Commissionable Volume
Definition: The value of sales that is used to calculate the commissions paid to distributors.
Example: If a product costs $100 and has a CV of $90, commissions are calculated on $90.
Compression
Definition: A mechanism in MLM plans that adjusts the organization structure when a distributor becomes inactive or leaves the company, allowing upper-level distributors to potentially earn more from remaining lower-level distributors.
Example: If a distributor in the third level leaves the business, the fourth-level distributors compress up, tightening the network.
Cross-Selling
Definition: The strategy of selling related or complementary products to an existing customer.
Example: A distributor selling skincare products might also suggest a line of organic makeup to their customers.
Downline
Definition: The network of distributors recruited by a specific distributor, including all levels created under them.
Example: If you recruit five people and they each recruit more, all these individuals make up your downline.
Distributor
Definition: An individual authorized to sell a company’s products and recruit other distributors. Distributors are the backbone of any direct selling company.
Example: A person joins a company as a distributor, buys products at wholesale prices, sells them at retail prices, and recruits others to do the same.
Enrollment
Definition: The process of signing up as a new distributor in an MLM company.
Example: John completes an enrollment form and purchases a starter kit to officially become a distributor.
Frontline
Definition: The first level of distributors directly recruited by you in an MLM structure.
Example: The five distributors you directly recruit are considered your frontline.
Fast Start Bonus
Definition: A bonus offered to new distributors when they achieve certain milestones quickly after joining the company.
Example: A new distributor receives a $100 bonus for achieving $1,000 in sales within their first 30 days.
Genealogy
Definition: The structured hierarchy or family tree of distributors within an MLM company, showing how different members are related and placed under each other.
Example: A company’s software allows distributors to view their genealogy to understand their network’s structure and where new recruits can be placed.
Group Volume
Definition: The total sales volume generated by a distributor and their entire downline.
Example: Your group volume includes your personal sales combined with the sales of everyone in your downline.
Hybrid Plan
Definition: A compensation structure that combines elements of multiple MLM compensation plans, often trying to maximize the benefits of each.
Example: A company uses a hybrid plan that incorporates aspects of both uni-level and binary plans to optimize growth and payouts.
Incentive
Definition: Additional rewards offered to distributors for meeting specific targets or achievements beyond regular commissions.
Example: Distributors receive a vacation to Hawaii as an incentive for top performance in sales and recruitment over the year.
Inactive
Definition: A status indicating that a distributor has not met the minimum activity requirements, such as sales or purchases, within a specified time period.
Example: A distributor who does not make the minimum required sales for three consecutive months is classified as inactive.
Leg
Definition: A branch or line of distributors that extends from a specific distributor in the compensation structure.
Example: If you recruit three distributors who then recruit others, each sequence forms a separate leg.
Leadership Bonus
Definition: Additional compensation paid to distributors who achieve certain leadership ranks within the MLM hierarchy.
Example: Upon reaching the level of Regional Manager, a distributor earns a monthly leadership bonus of $500.
Matching Bonus
Definition: A bonus earned by a distributor based on the commissions of their directly recruited downline members.
Example: A distributor receives a 10% matching bonus on the commissions earned by their first-level recruits.
Momentum
Definition: A phase where a distributor or MLM company experiences rapid growth in sales, recruitment, or both.
Example: The company gained momentum after launching a new line of eco-friendly products, doubling its distributor base in six months.
Network
Definition: The collective group of distributors within an MLM organization, including upline and downline members.
Example: Your network includes everyone from the person who recruited you, to the people you recruit, and further down the line.
Override Commission
Definition: A commission received by distributors above a certain rank on the sales made by their downline, beyond the immediate first level.
Example: Managers receive a 5% override commission on all sales made by distributors within their downline up to three levels deep.
Personal Volume
Definition: The volume of products that a distributor personally sells.
Example: Your personal volume this month is $2,000, based on your direct sales to customers and your own purchases.
Prospecting
Definition: The act of identifying potential customers or distributors.
Example: Distributors spend part of each week prospecting by attending events, making phone calls, and using social media to find new leads.
Qualified
Definition: The status a distributor achieves when they meet specific criteria necessary to earn commissions or bonuses.
Example: You are qualified for a bonus when you reach $5,000 in personal sales and your downline achieves a group volume of $10,000.
Recruitment
Definition: The process of adding new distributors to the MLM network.
Example: Effective recruitment strategies include hosting product parties, utilizing social media, and conducting informational webinars.
Spillover
Definition: In certain MLM plans like a binary system, new members recruited by upline that exceed the placement spots available in their immediate downline and are therefore placed in a downline of one of their existing downline members.
Example: You recruit a new member but your front line is full, so the new recruit is placed under an existing team member, creating spillover.
Sponsor
Definition: The person who recruits another individual into the MLM company and supports them in starting their business.
Example: Your sponsor is the distributor who introduced you to the company and helps guide your development.
Team
Definition: The group of people you directly and indirectly recruit into the MLM company, including those they recruit and so forth.
Example: Your team includes everyone from your frontline recruits to the distant members recruited by those you’ve brought into the company.
Upline
Definition: The line of sponsors that leads from a particular distributor up through the higher levels of the MLM organization.
Example: Your upline includes the distributor who recruited you, the one who recruited them, and so on up to the company founders.
Volume
Definition: The total amount of sales generated by a distributor or their team, often used to determine eligibility for commissions and promotions.
Example: Your monthly volume is calculated from your personal sales combined with those of your downline.
Wholesale
Definition: The cost price of products that distributors pay without retail markup.
Example: Distributors purchase products at wholesale prices and sell them at retail to earn a profit.
Conclusion
This glossary should serve as a valuable resource for understanding and navigating the world of direct sales and MLM. With this knowledge, you can effectively communicate within the industry and make informed decisions about your involvement in MLM ventures.
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