Glossary
Direct Selling and MLM Glossary
Plondo's glossary defines the terms direct selling, network marketing, and MLM companies use every day, in plain language. It covers compensation plan structures such as binary and unilevel, volume and rank terms like personal volume and group volume, genealogy and organization terms, and the compliance terms regulators watch most closely, such as income claim and inventory loading.
Compensation Plan Terms
How commissions, rank, and payout mechanics work.
Compensation Plan
A compensation plan is the fixed set of rules a direct selling or network marketing company uses to calculate how much each distributor earns from personal sales and from the sales of people in their downline. It usually combines a retail markup, a bonus on team volume, and rank based incentives. Common structures include binary, unilevel, matrix, and hybrid plans.
Binary Plan
A binary plan is a compensation plan that limits each distributor to two placement legs, commonly labeled left and right. Bonuses are usually paid when the smaller leg's volume matches a set amount of the larger leg's volume, a mechanic called a pair bonus. Extra volume beyond the paid pair typically rolls over to the next period as carryover.
Unilevel Plan
A unilevel plan is a compensation plan with no limit on how many people a distributor can sponsor directly, placing every personally recruited distributor on the same first level. Commissions pay out across a fixed number of levels below that first level, usually with the payout percentage decreasing at each deeper level.
Matrix Plan
A matrix plan is a compensation plan that limits both the width and the depth of a distributor's organization to a fixed grid, commonly written as width by depth, such as 3 by 7. When a distributor's own recruits would exceed the fixed width, the company places the overflow under another distributor in the matrix, a mechanic called spillover.
Hybrid Plan
A hybrid plan is a compensation plan that combines elements of two or more base structures, most often a binary or matrix front end for fast early bonuses with a unilevel back end for long term residual income. Companies build hybrid plans to pair the recruiting incentives of one structure with the depth incentives of another.
Personal Volume (PV)
Personal volume, usually shortened to PV, is the point or dollar value assigned to the products a single distributor buys or personally sells in a given period. Companies set a point value for each product that can differ from its retail price, and PV is the base measurement used to check whether a distributor is active and to calculate personal sales commissions.
Group Volume (GV)
Group volume, usually shortened to GV, is the combined personal volume of a distributor and everyone in their downline for a given period, sometimes capped at a set number of levels. Companies use group volume to determine rank advancement and to calculate team based bonuses such as matching bonuses or generation overrides.
Commissionable Volume
Commissionable volume, sometimes called CV or BV, is the portion of a sale's point value that a company actually pays commissions against, after removing shipping, tax, and any non commissionable items or discounts. Companies separate commissionable volume from a product's PV or retail price because the two figures do not always match.
Rank
Rank is a title a distributor earns by meeting a company's stated requirements, typically a minimum personal volume, a minimum group volume, and sometimes a minimum number of personally sponsored active distributors, over a set qualification period. Rank usually unlocks a higher commission percentage, a bonus pool share, or eligibility for company recognition and rewards.
Carryover
Carryover is volume left over after a period's bonus is paid that a plan allows a distributor to keep and apply toward a future period's bonus, instead of losing it. Carryover is most common in binary plans, where the leg with more volume after a pair bonus is paid often carries its extra volume forward.
Compression
Compression is a rule that skips over an inactive distributor when calculating commissions, moving the volume and placement of the people below that inactive distributor up to the next active distributor in the line. Companies apply compression so that an upline distributor is not blocked by someone who has stopped ordering or paying dues.
Breakage
Breakage is the portion of a compensation plan's total payout budget that goes unpaid in a given period, usually because no qualified distributor exists at a given position, rank, or matrix slot to receive it. Companies commonly redirect breakage into a bonus pool shared among distributors who did qualify at the top ranks.
Clawback
A clawback is a company's right to reverse or deduct a commission it already paid a distributor, most often because the underlying sale was returned, refunded, or cancelled, or because an order is later found to violate company policy. Clawbacks are usually deducted from a distributor's next commission payment rather than billed separately.
Organization and Genealogy Terms
How distributors, downlines, and company structures are described.
Direct Selling
Direct selling is a method of selling products or services in person, away from a fixed retail store, typically through independent sellers who work as distributors rather than employees. It covers a range of business models, including one time in home sales, party plan events, and ongoing network marketing businesses where distributors can also recruit and earn from other distributors' sales.
Multilevel Marketing (MLM)Regulated term
Multilevel marketing, usually shortened to MLM, is a direct selling business model where distributors earn commissions on their own product sales and on the sales made by distributors they personally recruit, often across several additional levels below those recruits as well. The Federal Trade Commission distinguishes a lawful MLM, which pays real commissions tied to sales to genuine customers, from an illegal pyramid scheme, which pays mainly for recruiting rather than for product sold to end users.
Network Marketing
Network marketing is a common industry name for multilevel marketing, emphasizing the personal and social networks distributors use to find customers and recruits rather than the compensation mechanics themselves. The two terms describe the same underlying business model, and companies often prefer network marketing because it carries a softer tone than multilevel marketing or MLM.
Distributor
A distributor is an independent contractor who sells a direct selling or network marketing company's products, and in most plans can also recruit other distributors and earn commissions on their sales. Companies use different titles for the same role, such as consultant, representative, or brand partner, but the underlying independent contractor relationship is usually the same.
Sponsor Genealogy
Sponsor genealogy is the record of who personally recruited each distributor into the company, forming a tree based on real world recruiting relationships. This tree usually stays fixed once a distributor joins, and it is the genealogy most compensation plans use to calculate personal sponsor bonuses.
Placement Genealogy
Placement genealogy is the record of where each distributor sits in the company's organizational structure for volume and rank purposes, which can differ from who actually recruited them. Companies with fixed width plans, such as binary or matrix plans, rely on placement genealogy to decide which leg or slot a new distributor's volume counts toward.
Downline
A downline is the group of distributors positioned below a given distributor in the company's organizational structure, including people they personally recruited and, depending on the plan, people placed under them through spillover or other placement rules. A distributor's downline can span multiple levels or generations, depending on the compensation plan's payout depth.
Replicated Website
A replicated website is a personal, branded version of a company's main website that a distributor uses to sell products and recruit new distributors, built from a shared template the company controls. Every distributor's replicated site typically shares the same design, product catalog, and compliance approved wording, differing only in the distributor's name, contact details, and personal referral link.
AutoShip
AutoShip is a recurring order, typically monthly, that a company automatically bills and ships to a customer or distributor at a set volume until it is cancelled. Companies often use AutoShip to help distributors meet minimum personal volume requirements consistently and to give retail customers an easy way to keep receiving products without reordering manually.
Compliance Terms
Terms regulators watch most closely, with a primary source cited.
Income ClaimRegulated term
An income claim is any statement a company or distributor makes about how much money a distributor can or does earn, including specific dollar figures, income examples, or lifestyle claims implying a certain earnings level. The Federal Trade Commission requires that income claims be truthful, substantiated, and not likely to mislead a reasonable prospect about typical earnings.
Inventory LoadingRegulated term
Inventory loading is a practice where distributors are required or strongly encouraged to buy more product than they can realistically sell or personally use, often to qualify for rank, a bonus, or continued active status. The Federal Trade Commission treats a pattern of inventory loading as a warning sign that a compensation plan is rewarding purchases rather than genuine retail sales.