Direct selling, term by term

The annual report US public companies file with the SEC, including risk factors and legal proceedings.

A plan rule that a participant must sell or use 70% of prior purchases before ordering again.

The condition, usually a monthly purchase or sales minimum, that makes a participant eligible for commissions.

An FTC settlement in which AdvoCare paid $150 million and left multi-level marketing.

A person paid a commission on sales made through their link, with no downline overrides.

A short email about a single recorded change at a watched company, with its source.

The FTC ruling that found Amway's plan was not a pyramid scheme, setting out the Amway safeguards.

A term in the participant agreement requiring disputes to go to private arbitration, not court.

The rate at which participants leave a company each year.

A recurring monthly product order, often used to meet activity requirements automatically.

Why an average income figure overstates what most participants earn.

The participant's online portal for orders, genealogy, commissions and reports; often a paid subscription.

A plan with exactly two legs where pay is calculated on the weaker leg's volume.

A newer title for a participant, emphasising social selling over distribution.

When a downline participant reaches a rank that removes their group from the sponsor's group volume.

The point at which a participant's income equals their costs of participating.

A court decision upholding the FTC's finding that BurnLounge was a pyramid scheme.

An FTC rule requiring disclosures when selling certain business opportunities; most MLMs are exempt.

A plan-specific point value used to calculate commissions, often lower than the retail price.

The company's commitment to repurchase unsold inventory from participants who leave.

An upper limit on commissions from a plan component, per period or per position.

A monthly payment towards a vehicle lease for participants who hold a certain rank.

The reversal of a commission when the underlying order is refunded or returned.

The government licence required to sell directly in China, which prohibits multi-level compensation.

A lawsuit brought on behalf of a group, such as all participants who lost money.

Strangers reached through advertising, social media or approaches in public.

The document that defines how participants are paid: commissions, bonuses, ranks and requirements.

Any revision to a plan's rules, rates, ranks or requirements, usually announced with little notice.

The company function that polices participants' claims, marketing and conduct.

Skipping inactive participants so that active ones move up a level for commission purposes.

DirectSellingStar's label on every figure: verified, reported or estimated.

A company's annual event, typically ticketed, with training, recognition and product launches.

A window after signing up during which a new participant can cancel for a full refund.

Recruiting a participant who is already in another leg or another sponsor's organisation.

Multi-level schemes selling cryptocurrency trading, education or tokens, frequently found to be frauds.

Volume from sales to non-participant customers, tracked separately in some plans.

Building a direct selling business on retail customers before recruiting anyone.

In binary plans, a payment triggered each time a set volume is matched across both legs.

A fixed daily routine of contacts, follow-ups and presentations a participant commits to.

Business costs a participant may subtract from income for tax; also the costs disclosures ignore.

How many levels down a plan pays commissions.

Selling products to consumers away from a fixed retail location, usually through independent sellers.

The US trade association for direct selling companies, with a code of ethics for members.

The traditional name for a participant in a multi-level plan; many companies now use other titles.

Everyone a participant has recruited, directly or indirectly.

The self-regulatory rules DSA member companies agree to, including buyback and earnings claims standards.

Direct Selling News' annual ranking of the largest direct selling companies by revenue.

The checks to make before joining: product, plan, costs, disclosure, policies and the people.

The idea that success comes from teaching recruits to do exactly what you did.

Any statement, explicit or implied, about how much a participant can make.

A legal term in some US states for a recruitment scheme that cannot sustain itself.

The Unfair Commercial Practices Directive bans pyramid promotional schemes across the EU.

What it costs to leave: unsold inventory, cancelled bonuses, lost relationships.

A bonus paid on a new recruit's first order or first weeks of sales.

The US consumer protection agency that enforces against deceptive earnings claims and pyramid schemes.

The cancellation of unmatched or excess volume at the end of a pay period in binary plans.

The scheduled contact after a presentation or sample, to ask for a decision.

Persuading new participants to buy large product quantities up front.

The US law prohibiting unfair or deceptive acts or practices in commerce.

A September 2024 FTC staff analysis of 70 MLM income disclosure statements.

An automated sequence of pages and messages that moves a prospect from first contact to sign-up.

Using ranks, badges, streaks and leaderboards to drive participant activity.

The tree view of a participant's organisation showing who sponsored whom.

A group headed by a participant of a given rank, used to pay leadership bonuses across breakaways.

A percentage paid on the volume of leaders' groups, by generation rather than level.

A window after missing a requirement during which rank or activity is kept.

Payments from the company before costs, versus what the participant keeps after expenses.

The combined volume of a participant and everyone in their downline.

Statements that a product treats, cures or prevents a condition, regulated separately from earnings claims.

A $200 million settlement requiring Herbalife to restructure its US compensation around retail sales.

A temporary area where new recruits wait before the sponsor decides their placement.

Free or discounted product given to the person who hosts a selling party.

A plan combining elements of two or more types, for example unilevel pay with a binary team bonus.

A company-published document describing payments to participants, typically by rank.

A calculation of expected income from plan rules and assumed volume and team size; not a forecast.

DirectSellingStar's annual analysis of normalized income disclosure statements.

The legal status of most participants: self-employed, not employees of the company.

A commission paid on volume to unlimited depth, usually only at the highest ranks.

A person who sells or promotes products to an audience they built on social media.

Buying product to qualify for rank or bonuses rather than to sell it.

The US legal test for a pyramid scheme, from the 1975 Koscot Interplanetary case.

A civil claim against a company, by regulators, participants, customers or shareholders.

Buying or producing lists of potential recruits or customers.

One branch of a downline, starting from a directly sponsored participant.

The need in binary plans to keep both legs' volume close, since pay follows the weaker leg.

A participant's depth in the tree relative to someone above them.

Implied earnings claims made through images of travel, cars or free time rather than numbers.

The opening of a new country by a direct selling company, often marketed as a ground-floor opportunity.

A bonus equal to a percentage of what personally sponsored participants earn.

A plan with fixed width and depth, such as 3×7, where extra recruits spill over.

The amount earned by the participant in the middle when everyone is ranked by earnings.

The legal seller in a transaction, responsible for payment, tax and refunds.

The purchase or sales volume needed each month to stay active or hold rank.

A sales model where participants earn on their own sales and on sales made by people they recruit.

A term barring participants from recruiting their downline into another company, during and after membership.

Figures from different companies' statements restated in a common definition so they can be compared.

What the hours and money spent on the business could have earned elsewhere.

A presentation, in person or online, that introduces the products and the compensation plan to prospects.

A commission paid to an upline on volume generated by their downline.

The number of people signed up as participants, as reported by the company.

Selling through hosted gatherings, in homes or online, with a host reward.

The share of company revenue paid out as commissions and bonuses.

Product bought by participants for themselves, counted as sales in most plans.

The point value of what a participant buys or sells personally in a period.

Deciding where in the tree a new recruit is positioned, which may differ from who sponsored them.

A fraud that pays existing investors with new investors' money, with no real recruiting structure.

A share of a global pool, typically a percentage of company volume, split among qualifying high ranks.

In a binary plan, the leg that receives spillover from the upline and grows without the participant's effort.

A recruiting period before a company or market officially opens, with promises of early position.

A customer who buys at a discount, usually on a subscription, without joining as a participant.

Identifying and approaching potential customers or recruits.

A company listed on a stock exchange, required to publish audited financial statements.

A structure in which participants are paid primarily for recruiting others rather than for selling products to customers.

Volume that counts towards rank or activity requirements but not necessarily towards pay.

A title in the plan reached by meeting volume and structure requirements, unlocking higher pay.

A one-time payment for reaching a new rank, sometimes paid in instalments.

Public acknowledgement of rank or sales achievements, on stage or online.

Bringing new participants into the plan under one's sponsorship.

A formal step by an authority against a company: complaint, order, fine, settlement or ban.

A buyer who is not a participant in the compensation plan.

The margin a participant earns selling product to a customer above the participant price.

The proportion of a company's sales made to non-participant customers.

The share of participants or customers who remain active over time.

A company's total sales in a year; in direct selling, largely purchases by participants and customers.

Reassigning an inactive or terminated participant's downline to the next active upline.

The point at which a market has no more willing customers or recruits.

Social security and income taxes a participant owes on net earnings, unlike an employee.

The proportion of all participants who received no payment from the company in a year.

The proportion of participants counted whose annual payments were below $500.

A concept of earning cashback and commissions by routing everyday purchases through a company's platform.

Direct selling that pays only on personal sales, with no downline overrides.

Selling through personal social media accounts rather than in-person events.

Recruits placed below a participant by someone above them, because of structure limits.

The participant who recruits and is credited with a new participant.

Placing recruits in a line under each other rather than side by side to qualify legs or ranks.

A plan where participants climb ranks by volume and high-rank groups break away from their upline.

The initial purchase required or encouraged to join, from a small fee to a large product pack.

Money already spent that cannot be recovered and should not influence the decision to continue.

Judging an opportunity by the people who stayed, ignoring those who left.

A packaged training programme, often sold separately, that teaches a duplicable method.

A plan rule requiring sales to a minimum number of retail customers each month to earn on downline volume.

The company ending a participant's agreement, forfeiting their downline and future commissions.

A call where a new participant brings a prospect to their upline to close the sale or recruitment.

Income top leaders earn from selling training materials and events to their own downline.

The proportion of all payouts received by the highest-earning one percent of participants.

A membership sold through multi-level compensation offering discounted travel.

What a representative participant, not a top earner, actually receives.

A unilevel plan that switches to generational pay at leadership ranks.

A plan with unlimited width where commissions are paid on a fixed number of levels.

The chain of sponsors above a participant.

An FTC action that halted Vemma's operations and led to a 2016 settlement banning pyramid practices.

Friends, family and acquaintances approached as customers or recruits.

A DSS Pro feature: companies you follow, with a same-day email when something changes.

The price participants pay for product, below the suggested retail price.

How many participants can be placed directly under one person.