Network Marketing Terms and Definitions
Some of the terms and definitions found in network marketing / mlm can be confusing to understand. 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
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
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
Cold Market: Prospects outside your circle of friends, family,
Commission: The percentage you earn from the sales volume of your
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
Direct Selling: A form of selling whereby
independent MLM / Network Marketing representatives, working on
commission, sell face-to-face outside of an established retail
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
Group Volume: The total volume of wholesale
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
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
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
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
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
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
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
Payout: The percentage of a company’s total revenue that it pays
out to distributors, in the form of overrides, commissions, and
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
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
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.