Network Marketing Terms and Definitions

Here are just some of the network marketing terms and definitions found in network marketing / mlm. Often they can be confusing to understand as companies and distributors often make up their own. Here is a list of some of the more common terms.

If while during your research you find a new term on a companies web site please use our contact form and send it to us. We will do our research on it and add it to the list here.

Achievement Level: A rank or title
that is achieved by moving a certain amount of product per month and / or re­cruiting a certain number of distributors who themselves have attained a certain designated achievement level.

Affiliate Program: An Internet business, such as Richdad.com, that allows people to become affiliates simply by providing a link on their Web sites to a corporate home page, and pays affiliates a commission on all sales made through that link.

Autoresponder: A Web site or a service Aweber that e-mails information automatically to anyone who clicks on the responder.

Binary: A type of compensation plan that limits your frontline to two people and pays out weekly on one of the two legs of your organization.

Breakage: Sales volume generated by you or your down­line
for which you receive no compensation.

Breakaway: An abbreviation for “stairstep / breakaway,” one
of the four major types of compensation plan. It can also refer to a distributor in your downline who has met certain minimum monthly qualifications and has consequently “broken away” from your group.

Breakaway Leg: The organization or downline of a breakaway distributor.

Bonus Pool: A special fund set aside by a network marketing / mlm company, from its profits, and distributed as a special incentive to qualified sales leaders.

Bonus Volume: See BV.

Business Builder: A distributor who is actively prospecting and gathering customers, as opposed to one who is simply buying product at wholesale for personal use.

Buy-Back Policy: The money-back guarantee offered by all reputable MLM companies to distributors. Generally, companies will pay 70 to 100 percent of the wholesale price on any product that a distributor purchases, but then de­cides to return, for whatever reason.

BV (Bonus Volume): An alternate expression for point volume (PV) or business volume (BV). It is a value used by
MLM / Network Marketing companies to calculate overrides and commissions, based upon the wholesale price of the items for which over­rides and commissions are being paid.

Circle of Influence: The people who are closest to you and who constitute your warm market. Also, those who might be easily influenced by you because of your reputation in a particular profession or community.

Cold Market: Prospects outside your circle of friends, family,
and associates.

Commission: The percentage you earn from the sales volume of your organization.

Commissionable Volume (CV): An alternate term
for bonus volume.

Compressed Plan: A pay plan that stacks or “compresses” the bulk of its commissions on the front end.

Compression: When a distributor quits or is terminated, his downline moves up one level, thus filling the empty space he left, and “compressing” the company’s downline by one level.

Depth: The number of levels in your MLM / Network Marketing organization.

Direct Selling: A form of selling whereby
independent MLM / Network Marketing representatives, working on commission, sell face-to-face outside of an established retail location.

Distributor: A person who contracts independently to sell products or services for an MLM / Network Marketing company.

Downline: All the people recruited as distributors
into a network marketing / MLM company constitute that company’s downline. Your downline consists of everyone whom you re­cruit, who is recruited by your recruits, and so on.

Drop-Shipping: The practice of shipping product
directly to customers from the company warehouse, rather than through an independent distributor.

Duplicatability: The extent to which an MLM / Network Marketing opportunity can be easily mastered by new recruits.

Duplication: The process of replicating business builders in your downline.

Group Volume: The total volume of wholesale
purchases made by your personal group in a given month.

Heavy Hitter: A top sales leader in an MLM company.

Home Meeting: An opportunity meeting held in a distributor’s home.

Hotel Meeting: An opportunity meeting held in a rented hotel conference room.

Infinite Bonus: A feature that theoretically creates infinite depth in a pay plan.

Infinite Depth: A feature of some compensation
plans allowing distributors to draw earnings from deeper levels, below their ordinary pay range.

Leader: A top achiever in an MLM / Network Marketing
downline.

Leg: A down line within your downline, usually headed by one of your frontline “Leaders” distributors.

Level: The vertical position of a distributor in your organization. If you recruit someone, he is enrolled on your first level. His recruits will be on your second level, and the recruits of his recruits on your third level.

Lukewarm Market: Prospects who are neither in your warm market nor your cold market, but somewhere in between. Can refer to people whom you have spoken to once or twice or people referred to you by others in your warm market.

Marketing Plan: An alternate term for compensation plan or pay plan.

Massive Action: A sustained, one time barrage of prospecting activity.

Matrix: A comp plan that limits the number of people on your frontline, usually to two or three.

Max Out: A comp plan is said to be maxed out when you have put enough people in place, moving a sufficiently high level of monthly volume, to qualify you for the maximum level of commissions available in the plan.

MLM/ Multilevel Marketing: Generally, an alternate term for network marketing. It can also be used to distinguish those particular network marketing plans that permit distributors to draw income from more than one level.

Momentum: The phase of a network marketing company’s growth when sales and recruiting begin to grow at an exponential rate.

Monthly Volume Requirements: An alternate term for qualifications.

Multi-Affiliate Program: An affiliate program that allows affiliates to recruit other affiliates and to be paid multilevel commissions on sales of their recruits.

Network Marketing: Any form of selling that allows
independent distributors to recruit other independent distributors and to draw a commission from the sales of those recruits.

Network Marketing Leads: Leads are people that have indicated an interest in a product, service or business opportunity.

Opportunity: The chance to join a mlm / network marketing distributorship, or another term for the distributorship itself.

Opportunity Meeting: A recruiting rally or business briefing held by MLM distributors for the purpose of presenting the opportunity to prospects.

Organization: That portion of your downline from which you are allowed to draw overrides and commissions. It includes all distributors placed on levels that fall within your pay range.

Organizational Volume: Monthly sales volume generated by your organization, through product purchases from the company.

Overrides: The monthly commission you receive from your breakaway
legs.

Payout: The percentage of a company’s total revenue that it pays out to distributors, in the form of overrides, commissions, and bonuses.

Pay Plan: An alternate term for compensation plan.

Pay Range: All levels of your downline from which your comp plan allows you to draw overrides and commissions.

Personal Group: All distributors in your pay range, whom you have personally sponsored, but who have not broken away.

Pre-Launch: The period just before an MLM / Network Marketing company’s official launch.

Prospect: A potential customer or recruit.

Prospecting: The process of seeking customers or recruits for your Network Marketing / MLM business.

Personal Sales Volume: The volume of product that you personally sell in a given month.

Personal Volume: The volume of product that you buy at wholesale from the company in a given month.

Point Volume: An alternate term for bonus volume.

Qualifications: Monthly quotas that distributors are required to meet, in order to qualify for a given achievement level. Quotas are usually set in terms of group and personal volume. Occasionally, there are recruiting quotas, requiring that you bring a certain number of people onto your front­line each month.

Recruit: A prospect who has agreed to join your downline as a distributor.

Renewal Fee: A yearly membership fee paid to an Network Marketing / MLM company, in order to maintain your status as a distributor.

Retail Profit: The spread between the wholesale price you pay for product, and the retail price at which you sell it to your customers.

Roll-Up: A feature in some plans stipulating that if you fail to qualify for commissions in a given month, because you did not meet your quota, you are declared inactive, and will receive no commissions from your downline that month.

Saturation: The theoretical point at which a network marketing / mlm company runs out of potential customers and recruits, and stops growing.

Sifting and Sorting: The practice of quickly identifying the most promising prospects and focusing your recruiting efforts on them, while ignoring the rest.

Sponsor: A distributor in an Network Marketing / MLM company who recruits and trains another distributor.

Stairstep: An alternate term for an achievement level, or for a stairstep / breakaway compensation plan.

Stairstep / Breakaway: A type of compensation plan that requires distributors to meet monthly volume quotas, in order to qualify for an ascending series of achievement levels, or “stairsteps.” When a distributor reaches a certain level, he “breaks away” from his sponsor’s group.

Stockpiling: The practice of buying and hoarding more product than you can possibly sell, usually in an attempt to meet excessive monthly quotas, to qualify for commissions.

Teleconference: A recruiting rally or business briefing that is broadcast by telephone. Prospects are told to phone in at a certain time to hear the event.

Three-Way Calls: A prospecting technique that allows distributors to build a downline while training recruits. When a raw recruit wants to interview a new prospect over the phone, he will 3-way his sponsor into the call. The sponsor gives the presentation while the recruit listens and learns.

Two-Level Plan: Another name for the compressed plan, derived from the fact that many compressed plans stack the bulk of their commissions on the first two levels.

Unilevel: A type of compensation plan in which you must qualify for achievement levels, but in which people in your downline cannot break away.

Upline: All of the people above you in a network marketing / mlm organization. Also, an alternate term for sponsor.

Warm List: A list of personal contacts drawn up by new recruits that constitutes their warm market.

Warm Market: All potential prospects for your business whom you personally know, either because they are family members, friends, or business associates.

Width: The number of people in a distributor’s frontline, or the number of people allowed in a distributor’s frontline by the rules of the compensation plan.