MLM glossary

Advance - An invitation to the next event. Usually more informative, designed to give the prospect an additional exposure to your business opportunity.

Binary - A type of compensation plan that limit the width of each level to two legs. Commissions are based on "cycles," where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg matches.

Cold market - Prospects outside your circle of friends, family, and associates.

Compensation Plan - 1. Money received as payment for selling a product to consumers and/or selling a product. 2. The “compensation plan” is the way a MLM company rewards the production of getting customers and recruiting others who get customers. MLM glossary.

Distribution - The process of marketing and supplying goods and services.

Distributor - A person who has signed an agreement to distribute a product or a service for an MLM company.

Downline - The distributors recruited by a given distributor who receives commissions on their sales and the sales of the distributors they recruit. MLM glossary.

Dream Stealers - A common term placed on people who provide an opinion or real facts that do not support the claims of easy and abundant success provided by the multi-level marketing opportunity. To ensure their down-line is fully invested in selling and recruiting for them, they try to limit the influence of people who don’t support the dream by presenting them as the enemy.

Duplicatable - An easy to repeat system. A good MLM company has an easily duplicatable system that all different types of people can apply.

Distributor - One who delivers products and or services by means of direct sales from the company to the public. May also be referred to as sales associate, business partner, or representative.

Edify or Edification - To build up, establish, or strengthen a person or institution, etc.; to uplift. When you introduce a speaker it is vital to edify them to the group in order to build credibility for the information presented. MLM glossary.

Elevator Speech - A short (no more than 30 seconds) speech designed to give requested information about your company.

Ethical - Being in accordance with the accepted principles of right and wrong that govern the conduct of a profession.

Ethical Business - A business that makes someone’s life better.

Executive Bonuses - Commissions for managers who exceed a sales quota. For example, 3% of the total company sales revenue may go to a bonus pool that is shared monthly pro rata to managers who exceed $10,000 in that month. MLM glossary.

Frontline - A person you have personally recruited to join your business. There is no one between you and them in the structure.

Generational Overrides - Overrides of managers from the baseshop of managers who were previously their subordinate. Most plans compensate at least three generations of such managers.

Heavy Hitter - The term “heavy hitter” is used in the industry to denote individuals who have had major success building sales organizations and selling products. Heavy hitters who have the ability to build quality long-term sales organizations are very much in demand.  MLM glossary.

Home based business - A business in which you run from a home office, or anywhere you choose.

Home meeting - A meeting in your home consisting of guests from your warm market, where the business opportunity is most likely presented by your upline.

Inventory loading (also called front-end loading) - Stocking up on products to meet sales goals, a practice that is promoted with claims that it will push the new distributor to higher bonus and/or leadership levels quickly. In reality, it increases the risk of significant financial loss if sales do not occur.

Leader - A leader is a distributor who recruits and trains a lot of people. MLM companies reward leaders highly because of the value they bring to the company and the people they recruit.
Note: A leader in MLM is not based on a resume (as in traditional business), but on production only.  MLM glossary.

Levels - The vertically structured segment of an MLM compensation plan. A person you personally recruit is on your first level. When some one on your first level recruits some one else, that person is on your second level. They recruit some one who is on your third level, and so forth.

Matrix Plans - A type of compensation plan that limit the width of each level in a distributor's group, forcing strong distributors to pile ("spillover") their recruits over people who did not sponsor them.

Mentor - A wise and trusted counselor or teacher. A mentor usually has a large involvement in the success of that whom they are teaching. It is crucial to your success in MLM to have a mentor. Mentors may or may not necessarily be your upline.

Market Saturation - Market saturation can happen when there are too many sales representatives in market where there’s not enough customers to support them all. MLM glossary.

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

MLM - Acronym for Multi-Level-Marketing.

MLM Business Model - Multi-level marketing businesses function by recruiting salespeople (also called Distributors, Independent Business Owners, IBOs, Franchise Owners, Sales Consultants, Beauty Consultants, Consultants, etc.) to sell a product and offer additional sales commissions based on the sales of people recruited into their downline, an organization of people that includes direct recruits, recruits' recruits, etc. This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager, but in some MLM programs, there can be seven or more levels of people receiving royalties from one person's sales.

Multilevel Marketing (MLM) - Any marketing program in which participants purchase the right to recruit additional participants, sell products or services, and be compensated for the sales by people they recruit as well as for their own sales. Also referred to as network marketing, direct sales, referral marketing. A business model that combines direct marketing with franchising. MLM glossary.

Naked pyramid scheme - Pyramid scheme that does not involve the sale of products. New participants pay a fee to participate and hope to profit by recruiting others into the system. Chain letters are an example.

Network Marketing - Any marketing program in which participants purchase the right to recruit additional participants, sell products or services, and be compensated for the sales by people they recruit as well as for their own sales. Also referred to as multi-level marketing (MLM), direct sales, referral marketing. Some believe that “network marketing” is different than MLM in that in MLM distributors inventory products to sell to consumers, but in network marketing distributors simply connect consumers with the network marketing company so they (the consumer) can buy direct from the company. Although this may be true in a small number of companies, it’s not being practiced in the industry as a whole - therefore the definition does not fit. MLM glossary.

Opportunity - Several multi-level marketing companies refer to their membership plan as an “Opportunity”, and as such has become common terminology in the industry.

Override Commission - The income one receives as the result of sales by a downline distributor. A legitimate and legal MLM company may only pay override commissions when actual sales of products or services are made.

Party Plan - A method of marketing products by hosting a social event, using the event to display and demonstrate the product or products to those gathered, and then to take orders for the products before the gathering ends.

Pension (Lifetime) - A sum of money paid regularly as a retirement benefit.

Pique (to pique interest) - A question to provoke interest in oneнs business.

Ponzi Schemes - A fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business, named after Charles Ponzi. MLM glossary.

Product based pyramid scheme - Pyramid scheme in which new participants are induced to buy products they supposedly will resell. State laws against pyramiding say that an MLM plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors. However, MLM companies typically structure their payment plan so that recruiting is more profitable.

Prospect - A potential customer or recruit.

Pyramid Scheme - Pyramid Schemes are illegal and are often referred too as Pyramid Scams. While Pyramid Schemes are not the same as Multi-Level Marketing, the line that separates the two is very slim and can be very gray. Pyramid Schemes are also based on recruiting new people, but rest solely on the exponential growth of new members and are therefore unsustainable. Because the money only flows upward, those who are recruited as the pyramid crumbles are left holding the short-end of the stick.“The key distinction between these schemes and legitimate MLM businesses is that in the latter cases a meaningful income can be earned solely from the sales of the associated product or service to customers who are not themselves enrolled in the scheme”. MLM glossary.

Recruit - 1. A prospect that has agreed to become part of your downline. 2. the act of prospecting some one to become a distributor.

Representative - Also referred to as distributor, associate, independent owner, etc. But regardless of the term used by the company, a representative is nothing more than an contract salesman.

Residual Income - Getting paid repeatedly for a one time sale. Ex: Acquiring a customer for a phone company that pays you a percentage of their monthly bill.

Sideline - A person who is in the same MLM company but is not connected structurally or within the same line.  MLM glossary.

Sorting - The practice focusing on the most promising prospects and concentrating your recruiting efforts on them, while ignoring the rest.

Sponsor - One who recruits another onto their MLM team.

Stacking - Stacking is a term used by network marketing companies to describe a distributor's attempt to manipulate compensation in the marketing plan by placing members of his or her household or family in the downline sales structure. It is frowned upon, and most companies have rules that are intended to discourage the practice of stacking.  MLM glossary.

Three-way-call - A prospecting technique used over the phone, which allows distributors to use a third party expert in order to assist them in summarizing the business opportunity.

Tap-rooting - Getting referrals from people who do not join your business or try your products. Obtaining these referrals as prospects is called tap-rooting.

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

Upline - Distributors who are above you in the MLM hierarchy. Understanding the word “upline” is a lot like understanding the word “boss.” The person you work for is your boss - but the person he works for is also your boss. Your upline is the person who brought you into the business - but their upline is also your upline.

Warm market - Potential prospects you personally know.