MLM Terminology – The Complete Guide

If you’re just joining the MLM industry, there are so many things you’ve got to master.

Joining an MLM is like entering a new universe with a different language.

You might quickly become perplexed when starting a business or doing research.

To assist you in understanding the lingo, we’ve created a list of the most popular MLM terminology.

Here’s a rundown of several that will come in handy during your trip.

First, however, we need to define MLM terminology.

What is MLM terminology? MLM terminology are terms that are frequently used in the business of network marketing, Multi Level marketing, and Direct selling. It’s always good to comprehend most of these terminologies before signing into or working for the company. .

What Is Multilevel Marketing (MLM)?

The phrase “multi level marketing” (MLM), also known as “network marketing,” “direct selling,” “referral marketing,” and “pyramid selling,” refers to a marketing configuration that some businesses use as a component of their overall marketing strategy.

This is an approach employed by some direct sales organizations to market and sell goods and services. MLM encourages current members to market, sell, and recruit new people into the company by using their existing networks of contacts. Distributors get paid a portion of the sales made by the people they hire. New hires are urged to make sales to make money since they join the distributor’s network or downline..

Understanding Multi Level Marketing (MLM)

This is how it goes. The company hires individuals as direct salespeople, distributors, contractors, or independent business owners. These individuals are then responsible for pitching the business’s goods and services to others, such as family members and friends. Both in-person and online sales are possible. For each purchase they make, a commission is granted to them.

Additionally, members are encouraged to invite or recruit new people to join the program as participants. Members are financially rewarded for recruiting new contractors since they receive a cut of their recruits’ sales, even though they may not feel obliged. And their recruiters, as well as those of their recruits, etc. 

What are MLM terms?

The phrase “multi level marketing” (MLM), also known as “network marketing,” “direct selling,” “referral marketing,” and “pyramid selling,” refers to marketing terms that structure the business component of their overall marketing plan.

MLM Lingo 

MLM Terminology Beginning With “A”   

Achievement Level 

Achievement level means attaining or exceeding a target level by adding a specific distributor number or selling a specific number of products in a predetermined time.

For instance, a distributor reaches the achievement level by achieving sales and hire goals.    

Active 

A distributor can keep the designation “Active” status by achieving a personal goal volume through a minimum number of sales or new distributor hires. Clients, distributors, or individuals can make the transactions.

For instance, the entire team will profit when the downline team becomes active.    

Affiliate

A marketing plan allows affiliates or third parties to boost sales of goods or services by using their marketing strategies in exchange for a commission.

As a sample, affiliate programs will give direct sales a good boost to continue doing well.   

Autoship

This is a software method to automatically ship a selection of things. A distributor can manage their volume and continue to be active.For instance, auto-ship is the ideal approach to increase sales and streamline your business operations.

MLM Terminology Beginning With “B”   

Bonus

Bonus is the additional compensation that a distributor receives from a business owner in addition to the commission due to performance. It could be expressed in monetary terms or as any kind of incentive.

For instance, the salesperson in an MLM organization will be paid a commission or incentive for bringing on new clients or recruiting new employees. 

Binary

Binary is a typical pay structure in which a distributor is limited to two frontline distributors. The extra recruits are distributed as a surplus to the funded distributors.

For instance, a distributor only recruits two members in a binary plan.    

Breakage 

Breakage represents the owed recompense. The discrepancy between a plan’s total or maximum percentage payment and the payout occurs. To qualify for commissions, for instance, some regulations must be broken.    

Breakaway 

This is a well-liked MLM payout strategy, also called the stair-step strategy. Once a distributor attains the breakaway rank, they have the freedom to separate from the present group and form their organization without needing an upline. For instance: That breakaway team’s volume will be included in the group of that breakout. 

Breakaway Leg

After reaching a particular level, a distributor’s downline might sever ties with their sponsor or upline. For instance, you will no longer earn the commissions from this breakaway leg when one of your recruits splits off and starts another team. 

Business Builder

The distributor actively pursues prospects and accumulates consumers rather than purchasing goods at discounted rates for private use. For instance, a business builder expands the team and brings in sales by bringing in new leads and clients.

Balancing Leg 

One can only receive the maximum payout by keeping equal volume in both downline legs and balancing the volume in those two legs. The term “balancing leg” refers to the leg utilized to balance the volume. Alternatively, the commissions will be paid considering the weaker, shorter leg. For instance: A distributor’s optimum payout is determined by the balancing leg. 

MLM Terminology Beginning With “C”   

Commission

The commission is the sum or percentage given to a distributor in exchange for services provided or after considering your company’s sales volume. For instance, distributors are paid a commission based on how many recruits they enlist or how much they sell. 

Commissionable Volume

Businesses pay commissions based on the cost of the goods under specific restrictions. Only a portion of the entire cost or a value is used to determine the commissions. The term “commissionable volume” refers to this sum.

For instance, commissionable volume is determined by considering a member’s or their downline’s sales. 

Cold Market

Individuals who are not members of your family or friends but could one day become potential customers for a salesperson. We can transform the cold market into a warm market by using social media and other forms of networking.

To get those cold market leads, for instance, talk to the locals when you go out and approach them with the appropriate assurance. 

Compensation Plan

It relates to how commissions are given to distributors, which are decided by considering their own and their downlines’ sales volumes.

For instance: Distributors receive commissions or bonuses for their own individual sales volume and that of their subordinates, depending on the specified incentive scheme. 

Crossline or Sideline

This refers to distributors not formally tied to one another within the same organization. They frequently collaborate on the same team to market products and are generally in the same regional area. 

MLM Terminology Beginning With “D”  

Direct Selling

Direct selling is selling goods directly to consumers, typically outside a defined retail environment. The vendor buys the goods from the direct-sale company and distributes them to the clients.

For instance, in the direct selling business model, businesses sell their products to clients directly and outside a retail setting while paying distributors a commission. 

Distributor

A distributor is an MLM company’s marketing and sales representative compensated with commissions. The revenue of the distributor’s team, which can be expanded by hiring other team members, will be considered for calculating commissions.

An MLM company, for instance, might have distributors who purchase its products at wholesale prices and then resell them to clients for commissions. 

Distributor Kit

Generally, an MLM asks that you sign up to sell and purchase a kit that contains merchandise and promotional materials. 

Dropshipping

As at a retail store, a distributor need not keep a physical inventory of the products. The distributor can give the MLM firm to which he represents the order and shipment information from the clients. The company will then supply the products straight to the customers.

Distributors, for instance, can benefit from dropshipping as they don’t need to stock the products physically. 

Downline

Members that join the business or are recruited by a distributor will also be given consideration when calculating the commissions due to their upline based on their sales or efforts. For example, your downline is the group of individuals you recruited. 

MLM Terminology Beginning With “E”  

Ethical Business

An ethical business does business while upholding ethical business standards of conduct. A distributor shouldn’t mislead consumers or potential customers for sales by making misleading promises or representations

For instance, ethical business avoids using unethical business practices. 

E-commerce

This business plan uses the web to buy and sell products. Businesses can be run by people or organizations listing their goods.

For instance, the e-commerce business strategy boosts profits since it prioritizes facilitating consumer engagement. 

Enroll

Enrollment in the MLM sector pertains to the addition or enrollment of new members. Each new enrollee can add or enroll new members under them.

For instance, after becoming a member, a person can start selling the goods and services of the affiliated business.

MLM Terminology Beginning With “F” 

FOLLOW-UP

It is a procedure that requires ongoing work to persuade prospects to join the organization and get its advantages.

For instance, educating the prospects and following up with them using the most outstanding presentations and innovative techniques would help attract more clients. 

Front line

Frontline members are those who have personally enrolled in downlines. By the company’s compensation scheme, these frontline employees and their businesses will also count toward a distributor’s commission.

For instance, MLM businesses pay distributors to bring fresh recruits to the front of the organization. 

MLM Terminology Beginning With “G”

GENEALOGY

There is a genealogy system to depict the people in a distributor’s downline. The members you hire and those hired directly beneath you are included. A distributor can obtain information about the enrollees from the genealogy and calculate a commission.

An MLM company’s member structure, as shown graphically by a genealogy, starts with the sponsor and ends with the downline. 

Group Volume (GV)

Group volume is the collective sales or purchases made by a distributor’s whole staff.

For instance, commissions are given based on the sales or transactions of a distributor and the team. 

MLM Terminology Beginning With “H” 

HYBRID

This is a compensation scheme that combines elements from two or more schemes. The Hybrid Plan gives its members high-income prospects because it delivers the advantages of multiple plans.

For instance, the hybrid plan combines various plans, enabling the MLM organization to generate considerable advantages. 

Home Meetings

Home meetings are when a distributor speaks with potential customers in person.

MLM Terminology Beginning With “I” 

Inactive

In MLM, inactive members are those who have been signed up or recruited but aren’t putting out enough effort or generating enough business.

For instance, the distributor’s income will be affected if the team under them is idle. 

Independent Distributor

Independent distributors make the company’s products known to the public through legitimate marketing channels and identify consumers willing to purchase the goods straight from them.

For instance, independent distributors offer goods and services using the MLM industry’s marketing strategies. 

Infinite Bonus

Beyond the standard commission paid per the payment plan, an additional commission is paid to the distributors taking into account the entire group volume of the team or organization. This bonus structure is helpful in getting assistance from uplines and assisting downlines.

For instance, in the MLM sector, distributors receive an unlimited bonus based on their higher position and overall group volume.

Incentives

Companies give distributors specific prizes or bonuses considering their growth in sales volume and the number of new hires to encourage them to do more business. Incentives describe this, enabling the distributors to increase their sales.

For instance, incentives will motivate distributors to increase sales and bring in new clients. 

MLM Terminology Beginning With “L”  

Leader 

A top performer or distributor who adds new people to their team or organization and ensures they receive thorough training in marketing and product sales is promoted to a leadership position by the business. The business compensates these leaders to keep them motivated.

For instance, a leader can train and assist the team members while promoting the company’s goods and services to potential customers. 

Lead Generator

A lead generator is an activity of generating leads through various techniques for persuading prospects to become prospective new members.

Example: Lead generation enables a distributor to contribute more to the company. 

Legs 

A leg is a downline that lies beneath one of the downlines managed by a frontline distributor.

Example: The right and left legs make up the first part of the MLM plan structure. 

Level

When they enroll, a new member will be positioned beneath you in the first level. These fresh recruits can subordinate them and attract more people, and they will advance you to the next level. For example, the MLM distributor network is scaled to several levels, and payouts or commissions are paid according to the tiers. 

MLM Terminology Beginning With “M” 

Marketing Plan

The MLM industry has a strategy for establishing the company. The distributors attract new members and bring in new business through this plan. The term “compensation plan” is also used to describe it.

The commission or bonus to be given to the distributor, for instance, is determined by the marketing strategy that has been selected.

Marketing Materials 

Some promotional tactics must raise awareness of the business and the items. These could be brochures or any type of training film that explains the details of the product and services in clear terms.

As an example, marketing materials are the resources that support MLM’s business growth. 

Matrix Plan 

One of the well-liked compensation plans is the matrix plan, where only a certain number of employees can be hired at each level. However, it won’t limit the total number of recruits a distributor may have. The extra members can be included to complete the matrix by moving them up a level.

For instance, the formula width * depth is used to determine compensation in matrix plans. 

Multilevel Marketing

Multilevel marketing is a company where products are sold directly through distributors. Each of these MLM distributors is paid based on the results of their efforts, typically thru a compensation plan, as opposed to the number of hours they put in. Distributors can profit from their sales as well as the sales of the distributors they bring on board.

MLM Terminology Beginning With “N” 

NETWORK MARKETING

Network marketing, often known as MLM or direct selling, is an industry where a network of distributors brings in clients and receives compensation. 

Network Marketing Leads

Active participants who are very interested in network marketing and see this as a fantastic business opportunity will be very interested in the goods and services.

For instance, effective network marketing leads will increase your earning potential. 

MLM Terminology Beginning With “O” 

Opportunity Meeting

A business gathering will introduce MLM business prospects and allow the public to learn more about the organization, its goods, and its services.

For instance, a well-organized opportunity gathering that considers both warm and cold market opportunities will produce positive results. 

Override

Override is the recurring commission one gets from the breakaway legs industry.

For instance, the sponsor or upline may be compensated extra for the downlines’ sales efforts. 

MLM Terminology Beginning With “P” 

Personal volume (PV)

This is the sum of a distributor’s monthly sales, including personal items purchased by the distributor and customer purchases.

For instance, a distributor’s monthly payment will depend on their individual sales volume. 

Product 

The products that an MLM business offers intend to sell to customers. The company sells goods in various categories, such as cosmetics, dietary supplements, apparel, toys, etc. The distributors bring the product to the consumer and profit from their sale by utilizing various marketing strategies.

For instance, MLM businesses use distributors to market exclusive goods not sold in retail stores.

Passive Income 

This is the money a distributor or member receives in exchange for minimal effort on their part and the downlines’ part. The pay depends on how big the team grows to be. Residual income is another name for passive income.

The MLM industry, for instance, is one of the best sources of passive income. 

Payout  

The business of the distributors’ downline and themselves earn commissions and bonuses for them. A portion of the company’s overall revenue is divided among these commissions as payment.

For instance, when distributors refer customers to the business, they are paid a share or a certain proportion of the profits.

Pay Plan

The alternate name for compensation plans in the MLM industry is the payment plan.

For instance: The distributors will receive commissions following the compensation scheme set.

Profit

Profit is simply the revenue a distributor receives when a product is sold. 

Prospect

This is a possible client or distributor keen on multilevel marketing. A potential customer can express interest in purchasing the company’s product or join the company and work as a distributor.

For instance: The distributors will be able to grow their team and increase their business by turning prospects into clients. 

MLM Terminology Beginning With “Q” 

Qualified Leads

Potential clients have expressed interest in the business and its products. They are individuals who are already intrigued by the item and won’t require much encouragement or more information to place an order. 

MLM Terminology Beginning With “R” 

Recruit

A recruit is an individual who joins an MLM business to sell the things the business offers as a member. The corporation pays the recruits a commission for the new customers they bring in.

For instance, a team member gets hired by an MLM company. 

Referral

The main form of marketing or promotion for MLM products is word-of-mouth advertising. When consumers use a product and are happy with it, they are requested to tell prospective leads about the product and encourage them to buy it or join the team.

For instance, referral marketing promotes products through personal connections. 

Rep

Rep is the abbreviation for representative. It can refer to a sales representative or distributor who can persuade customers to purchase the goods or services of a specific network marketing business. 

Retail

The distributors can purchase the goods at wholesale prices and resell them to clients while making a profit. Retailing is making a profit and turning it into a source of income. The distributors try to connect with as many clients as possible to convince them to purchase the items and qualify.

For instance, the distributors purchase the goods at wholesale prices and resell them to the customers at retail prices.

Retention Rate

The retention rate is the proportion of distributors or members who remain with the business as active participants. The retention rate is a sign of a successful MLM firm if it is high.

For instance, the retention rate is determined by tallying the company’s active members.

MLM Terminology Beginning With “T” 

Team

The customers or clients that a network marketing business recruits. A distributor’s recruiters and the people they bring on board form the team. Since this leader does not directly hire team members, it’s possible that they don’t know every single one of them.

For instance, the commissions received will increase as one builds their team.

MLM Terminology Beginning With “U” 

Upline

Your uplines are every distributor or employee above you in an MLM business. An upline is someone who brings on a new member as a downline, to be more precise.

For instance, uplines assist downlines in developing the team and finding new prospects.

MLM Terminology Beginning With “V”

Volume

Volume simply refers or means to how many goods were sold.

MLM Terminology Beginning With “W” 

Word of Mouth

In the MLM industry, word-of-mouth advertising is the required method of product promotion. A distributor distributes the product directly to the customers. If a customer utilizes it and is happy with it, they will recommend it to their family and friends. Word-of-mouth marketing is the name given to this form of oral advertising.

For instance, in the MLM industry, word-of-mouth advertising is one of the best methods of product promotion.

Weak Leg

A distributor has two legs in a binary compensation plan: weak and strong legs. Two additional frontline members can be added to the person’s right and left. The weak leg has fewer members and is shorter than the strong leg. The distributor must balance these legs. Nevertheless, the commission is paid according to the weak leg’s business. Therefore, it is also known as the money leg.

For instance, a weak leg produces fewer sales and accounts for payments. 

What are MLM people called?

If you sign up for an MLM program, the business may call you an independent “distributor,” “participant,” or “contractor.” Several MLMs claim that there are two ways to generate money: selling their goods directly to “retail” clients who are not part of the MLM or by joining an MLM.

What Are MLM Examples?

The following are some of the top US multilevel marketing businesses:

• Avon is a cosmetics company with about 6 million agents and $5.7 billion yearly revenue. It ranks as one of the biggest MLM businesses in the world. Avon Products, Inc.

• One of the most well-known MLM brands worldwide is Tupperware. The company, established in the United States in 1938, has reached a degree of brand recognition for its whole product category — plastic food storage containers — that is only rivaled by businesses with traditional distribution methods, such as Scotch tape or Hoover vacuum cleaners. 

• One of the most significant multilevel marketing firms for dietary supplements is Herbalife. It was started in California in 1980, and as of this writing, there are approximately 2.3 million independent distributors worldwide.

• With about $9 billion in annual revenue, Amway is the most extensive network marketing organization in the world. Over 3 million distributors sell health, beauty, and home care products in over 100 countries. In 1959, the company’s founders set up shop in the Great Lakes State.

What makes an MLM illegal?

Multi Level marketing, in general, refers to a sales structure where customers are urged to refer other customers to the business. Once hired, this salesperson gets a percentage of the sales made by the recruiter. Each salesperson makes money when a particular product is sold simultaneously. The distributors of MLMs frequently run honest, lawful businesses that profit from selling actual products and commissions on goods sold by distributors they have recruited.

Real-World Examples of Multilevel Marketing 

Multilevel marketing is commonplace in the corporate sector. Just two of the most well-known and well-liked businesses in this industry are listed here.

• Amway is a well-known direct sales organization that generates revenue through MLM. In 2021, the company’s self-reliant business owners generated $8.9 billion in sales through selling health, beauty, and home care items in more than 100 countries. Due to its size, MLM is now the most lucrative industry worldwide.

• Herbalife Nutrition is a well-known MLM company that produces and sells nutritional and weight-loss products. The business contends that sales of its products, not hiring, generate most of its profits. Additionally, it claims to provide members a variety of safeguards, such as a money-back guarantee, to prevent them from being forced to keep goods they couldn’t sell.

Is Multilevel Marketing a Pyramid Scheme?

Pyramid scams and multilevel marketing have been likened in the past. While some multilevel marketing strategies are legitimate, others are being looked into. This often happens when the top members of the company receive the majority of the profits, leaving the lower-level employees with little.

An organization may run a pyramid scheme if it emphasizes recruiting new members more than selling goods. These schemes occasionally include hundreds or even thousands of participants.

How can I recognize a potentially fraudulent multi level marketing (MLM) pyramid scheme?

The Federal Trade Commission (FTC) cautions individuals to be cautious of and steer clear of MLM promoters who

• Make outrageous promises about your considerable earning potential.
• Try to convince folks that the actual money is in recruiting others.
• Compel participation without providing sufficient information about the organization
• Make it plain that if they don’t act right away, a chance will pass them by.

Another red flag is when existing distributors keep purchasing goods they will never sell to meet the requirements for an incentive.

What Is an Example of Multilevel Marketing?

Avon is a prime example of multilevel marketing. The firm follows a strategy where sales are generated through a network of salespeople, through presentations, or in one-on-one situations in homes or companies. Like many other multilevel marketing companies, Avon normally does not run a dedicated retail store. Instead, the parent company gives entrepreneurs the means and resources to operate their businesses in numerous places. A direct sales approach is another name for this type of business strategy.

What’s the difference between MLM and pyramid?

While they appear to be an MLM technique, pyramid schemes are fraudulent. There is no actual product sold in a pyramid scam, which is how they differentiate from legitimate MLM programs. By only bringing in new participants to the business and new members, try to make money.

 

FAQS

What is the difference between SLM and MLM?

Those working with SLM companies get a commission depending on the sales made by their sales representatives. Suppose a salesperson works for a multilevel marketing company. In that case, they may expand their distribution network by linking with other salespeople.

How do you spot an MLM?

An MLM company doesn’t require consultants to have interviews, appropriate experience, or professional references. Members are in as long as they have a credit card to keep purchasing inventory.

What is the highest paying MLM company?

One of the highest-paying MLM businesses in the US is Forever Living. The business guarantees attractive returns and high commissions, and its goods are natural and authentic.

Is MLM a side hustle?

It’s a good idea to avoid a firm if hiring seems to be their priority rather than making sales of their goods. MLM firms might have the potential to be a fantastic side business for making extra money. Still, they also carry a lot of risks.

How long can an MLM last?

95% of MLM participants leave the industry in less than ten years, according to the same Jon Taylor FTC research. According to Bureau of Labor Statistics data, 30% of all small enterprises remain in operation for at least ten years. Accordingly, the average small firm is six times more likely to operate after ten years than MLMs.

Who is the No 1 MLM company in the world?

Amway is, without a doubt, the largest MLM organization of all time! Since fifteen years ago, it has dominated the network marketing sector. Amway leads the pack of MLM firms by having the most business alliances and associated organizations, along with sister company Alticor. Its million-strong sales team serves over 100 nations around the world.

What is the oldest MLM company?

Vorwerk is the oldest MLM on the list and markets a jumble of goods, from cosmetics to home appliances.

How Do I Start an MLM Business?

If the focus is on selling products rather than recruiting new members, network marketing, also known as MLM, can be profitable. You can join an existing MLM organization or create your own from scratch to launch your network marketing business. Still, suppose you choose the DIY option. In that case, you’ll need to build a partnership with a wholesaler or manufacturer to produce your actual product.

Is Direct Selling MLM?

The salesforce of an MLM is composed of independent sellers and their recruits in a tiered system. The term “MLM” refers to a system of levels. Direct selling is done by all multilevel marketing businesses, although not all direct selling businesses are MLMs.

What Type of Business Is MLM

Multilevel marketing (MLM) is a sales approach in which an organization builds a hierarchical, unpaid sales force to offer its products directly to clients and recruit new salespeople for the organization. Multilevel marketing is also known as referral marketing and network marketing.

Conclusion

Do you feel any better now? You now know the terminology to talk the talk more effectively. The truth is that multi level marketing, although legal, is frequently disputed. One issue is pyramid schemes, which pay top executives instead of individuals who do the work using funds from recruits.

By Seeming to Be Involved in Legitimate Multi Level or Network Marketing, These Schemes (and the Individuals Behind Them) Take Advantage of Other People. Pyramid Schemes Can Be Identified by Emphasizing Recruiting More than Product Sales. Thanks for Staying to the End of This Article. We Hope You Got the Value We Provided.  

SickofTheBoss.com is the brainchild of Jack Bastide. It is designed for entrepreneurs and those that want to be. You can find Jack on Facebook or Linked-In.