Welcome
Introduction
Is It Legal?
MLM v Pyramids
Residual Income
History of MLM
Definition of MLM
Where does the money come from?
Major Companies involved
Home Based Business
Possible Tax Benefits
Glossary
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GLOSSARY

 

Thanks to the MLMIA for a lot of these definitions

 

 

ACRONYMS

SEE  BV, PV, GPV, IP,

 

ACTIVE

When You PRODUCE the required PV in each designated period (i.e. month, every 4 weeks, quarter etc.) you are considered active and will receive compensation, bonus, royalty, (or whatever your company calls your recompense from your downline). Note:- Active means you are distributing product to customers or consuming them yourself.

 

ATTRITION

The term used for people resigning from a company.

 

APPLICATION FORM

The paper used as a legal binding contract which contains vital and necessary information for the company and distributor. Policies & Procedures should be on the form. Your sponsor should help you fill in the form and explain any areas that are not clear. Your sponsor puts his ID number on the form and the company will assign your number as soon as your application is received and entered on its data base (your sponsor may assign you a number). Once you have applied and received your kit you are a Distributor associated with the company and may start selling product. Note - If you do not understand the form do not sign until you have sought advice.

 

ASSUME

Don't ever assume. ASK questions

 

ATTITUDE

The MAJOR component of SUCCESS (85%). How you feel about yourself, your product, your company, and other people. A positive, enthusiastic loving and caring attitude will propel you to achieving your goals. As Zig Ziegler, a well known MLMer says "It's not the aptitude but the attitude that determines the altitude you'll reach in life."

 

AUTOSHIP

This is used to ensure that YOU qualify each designated period, by setting up a fixed order that Automatically qualifies you for that period, and is sent and charged on the same day each period. Some companies give a further discount on product cost for autoship. This also allows the company to reduce the amount of product they hold in the warehouse.

 

BACK END PLAN

Commission plan where the commission is spread over many levels, with high percentages at the lower or back end.

 

BONUS

Remuneration paid by the company to its distributors based on a set target of purchases and personally sponsored downline. It is an amount set aside for this purpose and is a percentage of the sales volume of your downline or on the number of levels according to the marketing plan, or compensation plan. (Do not confuse with commission).

 

BONUS POOL

The commission set aside to pay the Bonus.

 

BONUS VALUE.

This is usually referred to as BV. It is a value, other than PV, given to a product on which bonus is paid. This is necessary to allow for inflation since not all products have the same mark-up, and/or to show higher percentages in the compensation plan than the company is really paying.

 

 

BREAKAGE.

ANY Commission and / or Bonus which cannot be allocated to an individual, will roll up to and be retained by the company. Some companies make a lot of money from Breakage. Some use it for extra benefits for their members, others retain it as extra profit.

 

BREAKAWAY

In stair/step programmes (type of Marketing Plan) when members of downlines, direct or indirect, reach the top by producing a specific volume they are allowed to breakaway. Usually when this occurs, their sponsor is no longer directly responsible for their downline training and supplying them with sales aids and/or product. At this point, they purchase Direct from the company and should begin their own management training. The percentage of Bonus may change.

 

BREAKEVEN

The number of active distributors YOU need in your downline to cover your own monthly purchases. This is one of the best indicators for a genuine opportunity. Do your sums!

 

BUSINESS KIT

These are the tools, brochures, manuals and application forms (and sometimes products) necessary to begin your business. It should contain explanations of products, forms & how to fill them in, how to conduct business, sell, train and the marketing plan and how to explain it to prospective recruits. It is given to you by your sponsor or upline or sent to you by the company. There is usually a charge for the kit but no PV or BV should be paid on a kit.

 

BUSINESS VOLUME

The amount of product purchased each period by yourself and your downline. It is sometimes also referred to as BV. Check with your company rules to see.

 

BUY IN

When a person makes a lump sum purchase, or investment, for product not yet sold in return for a higher position in the marketing plan. Watch out when you are offered this option, even when given choices of product to purchase since you may not be able to move all the stock in a reasonable time frame. Check to see if you can exchange non-moving product.

 

BV

See Bonus Value and Business Volume.

 

CHALK TALK

The writing on a board at an Opportunity Presentation  or anywhere else showing the amount of dollars that one can earn when one sells product and sponsors  and trains others. Chalk talk figures should be checked for realism and truthfulness or achievability.

 

CODE OF ETHICS

Most MLM companies have a set of rules and regulations on how to conduct business. Those who are members of MLMIA additionally accept and practice the association's CODE of ETHICS.

 

COMMISSION

The difference in the amount of money between wholesale purchase price and retail selling price that a Company uses to pay their distributors as per the Compensation Plan. It is the amount of money available from selling product, i.e. the mark-up or gross profit. This is NOT a Bonus.

 

COMMITTMENT

An important agreement that you MAKE to YOURSELF, your family, your company, your distributors and your customers in order to be successful in MLM or life. Note - Sometimes you will not be able to keep your commitment. The mark of a successful person is to recommit when things do not work out as planned.

 

COMPANY

The base where decisions regarding policy, procedure and product lines are made and enforced. It is also the base for financial and administration functions. The company depends on the Distributors for their presence in the market and their reputation.

 

 

 

COMPENSATION PLAN

The Marketing Plan which shows how the company pays its Distributors. A copy of this should be reviewed before making a decision to become a Distributor to ensure that the time and effort are worth the compensation.

 

COMPRESSION

Some companies believe that YOU should not be penalised if someone in your downline doesn't purchase product during any designated period. The Compensation Plan will "roll up" the next active member below the non-active member into that spot-plus others under that person, so as to fill all the levels that you are entitled to be paid on. If the member becomes active the following designated period, the downline returns to its previous position.

CONSULTANT

A specialist who has experience with particular areas of MLM or business management, (i.e. accounting, data processing, compensation plans, administration). MLMIA has a directory of support people who provide consulting services to MLM companies. Note - some companies call their distributors  consultants and train them to be experts on their particular products.

 

CONSUMER

The end user for your product or service.

 

CONTRACT

The application form is a legally binding agreement and as such if in doubt do not sign until you have consulted a lawyer.

 

COPYRIGHT

Books, publications, manuals, brochures, video and audio tapes, CDs & DVDs, and application forms belong to the author, the publisher or the company for whom they were produced. They may not be reproduced in whole or in part without the express permission of the copyright holder. IDEAS are not copyrighted, but the material expressing the idea is. Plagiarism which is taking someone's work and "copying" it, with unimportant changes (a word here and there) is against the law.

 

CUSTOMER

A person who continues to be an end user. The reason you are in business. Often they will become a friend. Note - enough customers make chalk talk and success true.

 

DEPTH

The number of generations or levels in your Downline allowed by the marketing plan. Depth = strength in MLM.

 

DESIGNATED PERIOD

Each company sets its own requirement regarding when purchases have to be made in order for you to remain active. Most plans are Monthly, some are Quarterly, and some-especially Binaries- work on a 4 week cycle which means you purchase 13 times a year instead of 12. Be aware of this because it means that in one month each year you would make 2 purchases in a Calender Month, so your bank account or Credit Card needs to be in Credit or within your Credit Terms.

 

DIRECT SELLING ASSOCIATION or DSA

This is a highly respected organisation representing companies who sell direct to the public.

 

DISTRIBUTOR

A Distributor is an independent contractor who has signed an agreement with a company in order to receive the company's products and services at wholesale price. A Distributor participates in commissions and bonuses according to the compensation plan. A Distributor retails products or services to consumers, sponsors others into their downline and teaches others how to retail and sponsor too. May be called representative, consultant, rep, director or retailer.

 

DISTRIBUTOR KIT

See Business Kit.

 

 

DOWNLINE

Those people sponsored directly by a Distributor, or those sponsored by people the Distributor sponsored (indirect) to the depth allowed by the marketing plan.

 

DUPLICATION

A Distributor teaches those they sponsor the successful business practices of selling, sponsoring and training until they become a habit for the Distributor and the downline. Beware of using any selling technique that is not duplicatable.

 

EXPONENTIAL GROWTH

See Geometric Progression

 

FAST START BONUS

A reward given to a sponsor, from the purchase made by his/her new recruits 1st order only. This is used to encourage sponsoring by distributors. In this instance only, NO commission is paid to upline.

 

FOLLOW THROUGH/UP

A personal meeting, phone call or note to prospective customers, consumers, new Distributors or downline in order to ensure and build sales volume.

 

FRANCHISE

A method of selling a business concept and plan that generally requires major investment and includes a set of rules and conduct. Example -MacDonald's

 

FRONT END PLAN

A Compensation Plan where most of the commission is paid in the first 4-5 levels. Sometimes it has a very high percentage in levels 1 & 2.

 

FRONT LINE

Your Personally sponsored Distributors are placed on the level DIRECTLY below you. It is your First level (first generation).

 

FRONT LOADING

See Buy In

 

GPV

Group Personal Volume.

 

 

GENEALOGY REPORT

A computer printout of varying detail. It can provide names, addresses, phone numbers of upline and downline or whatever is specified by programmer.

 

GENERATIONS

See level or downline.

 

GEOMETRIC PROGRESSION

There should normally be more distributors on the 2 nd level than the 1 st and more on the 3 rd  than 2 nd  etc. Geometric Progression is the "Holy Grail" of MLM.

 

GROUND LEVEL

The beginning stages of a new company. Check out a company before joining to ensure that they have a solid foundation.

 

HEAVY HITTER

This is a term given to a Distributor who has the ability to recruit large numbers of other distributors (1000s) into a company. If this Distributor believes in the long term future of the company and their future with it then a win/win situation exists for everyone. Otherwise there may be front-end loading and they should be called "Hit and Run Artists". Check your sponsor's record to protect your interests.

 

IDENTIFICATION NUMBER. ID #

 Assigned by the company to list Distributors and record upline and downline for activity upon which Commissions & Bonuses will be paid.

 

IP

International Points. This is used by some companies to level out the commission structure to accommodate Foreign Currency values in relation to the currency of the country of the Company.

 

INFINITY BONUS

Some companies infer that their plan allows members to earn on every person in their downline. Generally this is NOT possible-but if it is correct then the amount coming from lower levels would be infinitesimal. This panders to greed and should not come into your calculations. Again, do your sums!

 

 

MARKETING PLANS

Three types or their variations are generally used by MLM companies

 

UNILEVEL

You sponsor an unlimited number of people on your first level and they do the same and so on through a fixed number of levels.

 

MATRIX

There a fixed (limited) number of people in your first level, a fixed number in your second level etc down to depth. You - not your sponsor - are responsible for filling the matrix.

 

STAIR STEP

Where you sponsor and they sponsor etc and those sales are added together to accumulate a volume required to move you to the next highest position in the marketing plan.

 

MATCHING BONUS

YOU are entitled to the same bonus earned by anyone YOU personally sponsor.

 

MLM

See Multi-Level Marketing

 

MLMIA

Multi Level Marketing International Association

 

MOTIVATION

The internal force that makes Success happen.

 

MULTI-LEVEL MARKETING

A method of getting product from the manufacturer to the consumer.             

 

NETWORK MARKETING

Another term for MLM.

 

NETWORKING

A sharing of information or ideas. Another term for MLM.

 

ONE ON ONE

A person to person presentation of the product, service or marketing plan.

 

ONE PLUS ONE EQUALS SUCCESS

Sponsor one Qualified person a month. Teach those you sponsor to sell products and sponsor one person per month and train them to do the same. At the end of a year you have 2048 people in your downline. 1 + 1 = SUCCESS.

 

OPPORTUNITY MEETING

A periodic meeting or gathering of MLMers for the purpose of introducing and explaining to prospects the opportunities both of using the products or services and financially of being a Distributor for the company. This is usually presented with chalk talk before a group of people.

 

ORGANISATION

1. The total number of Distributors in a downline.

2. An association for the benefit of all-MLMIA for example.

 

OVERFLOW

This is supposed to happen in a matrix type programme. When someone above you (i.e. a Heavy Hitter) sponsors more people than is necessary on their first level there is an overflow (spill over) from which you will supposedly benefit.

 

OVERRIDE

See bonus.

 

OVERWRITE

See Bonus

 

PARTY PLAN

A hostess is recruited to hold a party for people to view the products and services and/or to hear the marketing plan. This is a fun atmosphere where the hostess receives a gift and/or a discount on product purchased based on the total sales of the party. Additional parties should be booked whenever possible from each party.

 

PERSONAL VOLUME

This figure is usually at or near the wholesale cost to the Distributor and is the basis on which compensation & bonus is paid. Most companies have these explanations in the copy of the Compensation Plan, which you get with your Business Kit.

Another factor that determines profitability is how the percentages are calculated. Some MLMs calculate commissions based on actual purchases, but most calculate on "commissionable volume" (CV) or "business volume" (BV) or some other number that refers to a less-than-100% portion of actual sales. So, for example, a plan might call for 10% commission on minimum purchases of 100 "BV" (yielding a $10 commission) but you may have to spend $110 to achieve 100"BV". So based on cash purchases, this "10%" is really paying 9.1% ($10 on a $110 purchase). Once again you MUST do your homework before joining!

 

PIN Number

Your Personal Identification Number

 

PIRATING

Taking downline from another Distributor. This is totally unethical and is banned by legitimate/ethical companies.

 

POWER LINE

This is Specific to Binary Compensation Plans. One leg tends to grow much faster than the other and is referred to as a Power Line. However the other line still has to be built.

 

PRACTICE

A professional MLMer keeps learning and trying new techniques to improve him/herself, their knowledge, skills and their downline to achieve more from their business. Practice makes perfect and is fun.

 

PRINTOUT

See Genealogy Report

 

PRODUCT KNOWLEDGE

Information, uses and specifications regarding the products and services necessary for a Distributor to be Successful.

 

PROSPECT

A person you want to offer the opportunity of joining your MLM or becoming a customer.

 

PURCHASE VOLUME

See Personal Volume

 

PYRAMID

A term used by law enforcement officials to describe an illegal sales scheme. "Selling the right to sell" where one is paid for recruiting or sponsoring others.

 

PV

The dollar value assigned to the volume of products ordered by a Distributor and his/her downline that is used to determine commissions and bonuses. See also Personal Volume.

 

QUALIFIED

Someone who meets or exceeds the minimum product purchase requirements each qualifying period

 

RALLY

A company function to stimulate and enthuse Distributors. Fun, exciting and educational and is known to help an area or company grow.

 

REBATES

See bonus.

 

RECOGNITION

Successful distributors are acknowledged, either on stage at a convention or in the Company Magazine. This is a great moral booster and incentive for members to be publicly recognised.

 

RECORDS

Descriptions and information, receipts on purchases, petrol mileage, meals, trips, entertainment, training courses & material, anything that you can use at tax time to reduce the amount you pay the government. Should be maintained and updated on a regular basis.

 

RECRUITING

Inviting others to join your organisation to share the same opportunity you do.

 

REFUND

Legal MLM companies guarantee their products so that if a customer is not satisfied the consumer gets a refund from the Distributor who in turn gets a refund from the company either in cash or replacement product.

 

RELATIONAL MARKETING

An approach based on Multi-Level Marketing, emphasising personal relationship with your downline.

RESIDUAL INCOME

The income you earn from your downline each time you qualify via your product purchases. This will last "forever" as long as you remain active and the company remains in business.

 

ROYALTY

See Bonus

 

SELL

If you are told that there is "No Selling Required" then the company will not last. However MLM is really selling YOURSELF and if you do that successfully you will succeed.

 

SEMINARS

A meeting where the seeds for success are sown. A great way to develop yourself and learn how to enrich your life, your business and your relationships.

 

SHARE

Often overused in MLM. Should be used only in sharing ideas and techniques not products. Products are to sell.

 

SIZZLE PRODUCT

A product that a company uses as it's Market Leader

 

SIZZLE SESSION

An opportunity meeting held in a restaurant or over a meal where the chalk talk is on a napkin.

 

SKILLS

The techniques by which you use product knowledge to sell your way to success.

See training to learn how.

 

SPILLOVER

See Overflow

 

SPONSOR

A person who recruits another Distributor into his/her organisation and who is responsible and commits to helping that new person succeed (see 1 + 1 = Success).

 

 

 

SPONSORING

The act of bringing new Distributors into your organisation.

 

STACKING

Placing Distributors in certain positions in a downline to control bonuses. Not recommended as it tends to be unworkable. Prohibited in good companies.

 

STARTER KIT

See Business kit

 

SUCCESS

There are three parts to Success:

Product Knowledge (5%),

Skills    (10%)

ATTITUDE (85%).

 

1. For A DISTRIBUTOR

The process of building the business and future wanted. The 2 secrets to success for a Distributor are:

1. See More People, Sell More Product, and Sponsor More People, Train   yourself and others.

2. See Rule 1.

 

2. For A COMPANY

The process of understanding and servicing the needs of consumers and Distributors so that the company grows and profits. As above plus

Quality product or service at a fair market price,

Good people oriented management,

A workable and fair compensation plan,

Proper financing

An understanding and willingness to abide by MLM guidelines and a Code of Ethics

 

SUGGESTED RETAIL PRICE

A price recommended by the company for sale to the consumer. A Distributor may sell at whatever price he / she wishes.

 

TAXES

As an independent business person, you are required to meet YOUR governments regulations and if necessary you should see an accountant.

 

TRAINING

Teach those you personally sponsor what you know. Attend whatever meetings, seminars, and rallies  whenever you can. Read books, articles, information, newsletters. Keep yourself and your downline informed. Try new ideas and evaluate their success.

 

UPLINE

The person who sponsors you and then that persons sponsor and so on.

 

WAREHOUSING

By special agreement with the company when you have a large downline to maintain you may keep a larger amount of product on hand than can normally be sold in a month,. Ensure buy back policy and that the company is abiding by MLM laws before agreeing to warehouse.

 

 

 

WIDTH

The size of the frontline that is allowed by the Compensation Plan of your company. You should aim to sponsor at least one person personally per month to build a successful business.

 





|Welcome| |Introduction| |Is It Legal?| |MLM v Pyramids| |Residual Income| |History of MLM| |Definition of MLM| |Where does the money come from?| |Major Companies involved| |Home Based Business| |Possible Tax Benefits| |Glossary|