Direct selling is an often misunderstood industry. That’s why at Direct Selling Disinformation, we make a concerted effort to educate, empower, and provide readers with the resources and data they need to make an informed decision about the direct selling industry.
In this guide, which we hope will be helpful, we aim to provide definitions for some of the most important as well as most commonly confused direct sales terminology used in our industry.
With that said, let’s dive right into what we hope will be a comprehensive explanatory guide for your reference.
Looking for answers to some of the most commonly-asked direct selling industry FAQs? Head to the bottom of our homepage, where you’ll see questions such as “Is direct selling legal and safe?” and “Why do some people succeed in direct selling and others don’t?”.
A Glossary of Essential Direct Sales Terminology
Here are some of the most commonly misunderstood and otherwise important direct sales terms that you should know if you want a complete and accurate understanding of the direct sales industry.
You’ll notice that we broke down terms into categories ranging from basic to compensation/sales related, to operational. We hope this provides a conceptual grounding for you of the context in which these terms fit into the greater direct sales landscape and how they might be used.
Note: We’ve used the following sources for some of the definitions listed in the glossary below. We will refer to each by its source name noted parenthetically below.
- QNET Dictionary (Source: QNET)
- 2015 Direct Selling Growth & Outlook Survey (Source: Nathan Associates)
- Direct Selling: A Glossary of Terms (Source: Asenshia)
Basic Direct Selling Terms
- Direct Selling: Direct selling is also known as network marketing or multi-level marketing. At its core, direct selling is simply a method of marketing and retailing goods and services directly to the consumer. (QNET)
- Direct Seller: Also known as consultants, distributors, and representatives, direct sellers “may sell the products themselves or through their sales organizations. They provide training and leadership, refer customers to the company and buy products and services for personal use. They can be described as “active” or “inactive.” (Nathan Associates)
- Independent Salesforce Member: Another name for “direct seller”.
- Direct Selling Association: “An organization of companies operating under the laws of the host country to represent the interests of those firms. Self-regulation is used to promote the highest level of ethics and business practices within each association.” (Asenshia)
Compensation and Sales Terminology
- Compensation Structure: This refers to the way in which a direct seller is compensated, or paid. There are various types of compensation structure such as straight commission, matrix compensation, binary compensation, territory volume commission, hybrid, and more.
- Multilevel Compensation Plan (MLM): Multilevel marketing companies, or MLMs utilize a multilevel compensation plan. In this type of compensation plan, “Individuals generally receive secondary compensation on any sales made by those they have recruited, trained, motivated, and/or supplied with products. Compensation is also received based on sales from the recruits of recruits. Direct Sellers also earn compensation based on their consumer sales.” (Asenshia)
- Single Level Compensation Plan (SLM): “Sometimes known as SLM, this is a structure by which the independent direct sales representative is paid only retail profit (the differential between the wholesale price of an item and the retail sales price).” (Nathan Associates)
- Sales Method or Approach: Direct sales utilizes a number of different ways for direct sales reps to approach customers. Some of the most common are face-to-face or person-to-person sales, which involve a 1:1 interaction between sales rep and customer and party plan selling (AKA group sales), which involve a direct sales rep selling to a group of people. (Nathan Associates)
Organizational and Operational Terms
- Pyramid Selling: A fraudulent form of direct selling/illegal MLM structure.
- Genealogy: Organizational structure of Independent Representatives (IRs). It provides a visual representation of the IRs and their respective downlines. It presents the relationships between IRs and their downline members in a tree-like structure. (QNET)
- Downline: Downline refers to Individual Representatives/Direct Sellers who are referred and positioned under a particular IR forming a genealogy structure, by which every IR can build and expand their own product sales team. (QNET)
- Upline: “All independent contractors in a direct line toward a person (sponsor) or the company responsible for his/her involvement.” (Asenshia)
- Sponsor: “A Direct Seller who has introduced another person into the firm to be employed as a salesperson.” (Asenshia)
- Recruit and Recruitment: Direct sellers not only sell goods, but also recruit other direct sellers.
- Direct Referral: These are the people recruited by direct sellers as described above.
Learn More About the Direct Selling Industry
At Direct Selling Disinformation, we’re motivated by the desire to tell the world about the powerful impact direct sales can have and the potential it holds. We do this in large part by covering the most relevant topics and tackling myths head-on.