Direct Selling Glossary of Terms

Direct selling, like most industries, has its own vocabulary to describe its people, companies, equipment, and general operating procedures. This glossary contains the most commonly accepted terminology. The language does change however, and some of the words and phrases that follow do not necessarily have the same meaning throughout the industry. These definitions are provided for background purposes only.

 Active consultant/dealer/distributor. Refers to an independent contractor direct seller running a business by selling products or services to retail customers or by recruiting downline direct sellers. Many direct selling companies use the terms "active" and "inactive" to describe the status of their direct sellers. What qualifies a direct seller as "active" or "inactive" differs from company to company. An "inactive" direct seller may have temporarily or permanently stopped working their business.

 Application form. A contractual agreement between a prospective salesperson and the company, which includes the prospect's name, address, phone number and social security number.

 Association. An organisation of companies operated under the laws of the host country to represent the interests of those companies and to promote the highest level of ethics and business practices of those companies through self-regulation.

 Binary. A compensation plan in which a direct seller develops an organisation of two sides: a left side and a right side. Direct sellers activate these sides by recruiting two individuals who are placed on either side. Once both sides are "activated" with the sponsoring of a recruit, subsequent recruits are placed under one of these two sides. Compensation and advancement are based on the performance of both sides.

 Booking. Creating an interest in and setting a definite date for holding an in-home demonstration.

  Bonus. Money paid by the company either as a rebate on personal purchases or as an override on the purchases of a salesperson's group at different levels.

 Breakaway. In some plans, when a direct seller is promoted to another level they "break away" from their sponsors and their volume is no longer included in the sponsor's group volume. Also known as a "stairstep breakaway."

 Business volume (BV). The assigned value of each product purchased or sold by a direct seller. Business volume is often different from the dollar amount paid for the product and is used to determine advancement and bonus qualification of the direct seller.

 Buyback policy. A policy required by the SELDIA Code of Ethics. Under some DSAs' Code, the policy requires member companies to repurchase at not less than 80%-90% of the cost paid, inventory and sales aids purchased by a terminating direct seller within one year prior to termination. Buyback policy is synonymous with "inventory repurchase."

 Buy/sell. Method of compensation in which an individual purchases products from the company at wholesale, and sells the product to customers at retail or resells the product at wholesale to a downline distributor. The differential between the wholesale and retail price represents the seller's profit.

 Code of Ethics. Statement of principles that establishes industry-wide self-regulatory standards. Codes exist at national and European level. The European code aims to protect consumers and direct sellers in those countries that are member of the SELDIA. Pyramid schemes and inventory loading are specifically prohibited by the Code. Also, the Code specifically requires companies to adhere to a buyback policy. Administered by an independent party known as the "Independent Code Administrator."

 Code Administrator. An independent person or body appointed by a DSA to monitor member companies' observance of the DSA's code and to resolve complaints under the code. Cold canvass. Door-to-door solicitation without prior contact or invitation.

 Commission. A method of compensation in which a salesperson sells to the customer who then pays the company for the product. The company gives the salesperson a percentage of the receipts as a commission. Alternatively, the customer's down payment represents the commission and the outstanding contract and balance exists between company and customer.

 Consultant. An independent contractor direct seller. Many direct selling companies use different words to describe their direct sellers and "consultant" is one of those terms. See "dealer" and "distributor."

 Cooling-Off and Return of Good. Provision in the Code of Ethics which requires all SELDIA member organisations, whether it is a legal requirement or not, a cooling-off clause in any order form which permits the customer to withdraw from the order within a specified period of time and to obtain reimbursement of any payment or goods traded in. Some companies offer unconditional right of return. This provision is aimed at eliminating high-pressure sales tactics.

 Cross Border Sponsoring/ International Sponsoring. Recruitment of salespeople outside of the national borders in which the recruiting distributor typically operates.

 Dealer. An independent contractor direct seller. Many direct selling companies use different words to describe their direct sellers and "dealer" is one of those terms. See "consultant" and "distributor."

 Demonstration kit. A set of materials packaged together containing samples of merchandise and various sales aids.

 Direct seller. A person who sells by the direct selling method. Many direct selling companies use different words to describe their direct sellers that are independent contractors. See "consultant," "dealer" and "distributor."

 Direct selling. A method of distribution of consumer goods and services through personal explanation and demonstration at other than fixed business locations, primarily in a home or office environment.

 Distributor. An independent contractor direct seller. Many direct selling companies use different words to describe their direct sellers and "distributor" is one of those terms. See "consultant" and "dealer."

 Distributor kit. Generally, the order forms, sponsoring forms and product literature sold by companies to new distributors. The materials contained in a distributor kit may be included as part of a demonstration kit.

 Doorstep identification. The concept requiring individual sellers to identify themselves, the companies whose products they are selling, and the nature of the products they wish to demonstrate.

 Downline. Direct sellers sponsored one or more levels away from another in a directly linked line.

 Follow-up. Communications with prospective or actual customers shortly after the initial presentation.

 Front line. A direct seller's first level of downline direct sellers.

 Generations. The relationship between one direct seller and another in an organisation.

 Group. See, "organisation."

 Group volume (GV). See, "organizational volume."

 High-ticket item. A product or service that costs a significant sum of money. The term is subjective, with application varying from person to person. The term often refers to durable goods that are not consumed and have long life expectancy.

 Home office sale. Orders on which the company handles delivery and billing.

 Host/hostess. Person who invites friends and neighbours to attend a sales party in his or her home.

 Host/hostess gift. A token of appreciation offered as a way of thanking a host or hostess for the use of his or her home to conduct a demonstration.

 Incentives. A reward offered to salespeople for achieving desired performance goals.

 Independent contractor. An individual who sells the products of a company according to his or her own methods and without being subject to the control of the company. Ninety-nine percent of all direct selling is done by independent contractors who are not employees of the company whose products they sell.

 Internal Consumption. The purchase and use of product by individuals who sell for direct selling organizations for their own and/or their families' consumption and use. Individuals who sell for direct selling companies frequently use the products themselves, and receive compensation for the purchase of products by other sellers engaged in this internal consumption. Inventory repurchase. See, "buyback policy."

 Leads. Names of individuals who may have an interest in purchasing a product or service or in becoming distributors themselves.

 Leg. That part of a distributor's organization consisting of a personally sponsored distributor and his or her downline.

 Low ticket. A product or service that costs a small sum of money. The term is subjective, with application varying from person to person. The term can refer to consumable items, i.e. items that are purchased frequently for everyday use.

 Maintenance level. A minimum purchase volume required in some marketing plans in order to receive overrides or to stay active in the business.

 Managers. Field supervisory personnel who may also sell products directly to consumers. They may be independent contractors themselves, or company employees.

 Marketing plan. The overall distribution and compensation plan provided by a company to its independent contractors.

 Multilevel compensation plan. A distribution and compensation structure involving multiple levels of distributors. Individuals generally receive some compensation on the retail sales made by the individuals they have recruited, trained, motivated, and/or supplied with products, and on the recruits of recruits, in addition to earning compensation based on their own sales at retail to consumers.

 Opportunity meeting. An introductory meeting where either a trained company representative or the sponsoring independent contractor talks about the company, its marketing plan, and its product line.

 Order boost. An incentive used to increase the size of an average order.

 Organization. The number of all independent contractors in a subject's downline.

 Organizational volume. The total of dollars spent or purchase volume (PV) made, either in a given period (often on a monthly basis) or cumulatively, by an organization for products for resale and personal use. This term is synonymous with "group volume."

 Override. The compensation received by a direct seller on the sales made by individuals whom he or she recruits, trains, motivates, and assists.

 Party plan. A sales presentation made to a group of individuals (guests), invited by the homeowner (host/hostess).

 Premium. An article of merchandise offered to sellers as an incentive for the performance of a specific service or the accomplishment of a set goal, or to customers as encouragement to purchase specific items or as a reward for reaching a specified purchase amount.

 Prospect. A person identified by a direct seller as someone he or she wishes to sponsor into the direct selling business.

 Personal volume (PV). The total of commissionable product sold by a direct seller in a given period.

Pyramid scheme. A fraudulent scheme characterized by the investment of funds for the right to recruit more people into the program and thereby receive a percentage of their investment. Recouping the initial investment and profits for a participant depends upon the recruitment of more participants, as in a chain letter, rather than on the sale of products to consumers. Its structure resembles a pyramid, with only a small percentage of participants at the top generally recouping their funds before the scheme collapses. There are four hallmarks to pyramid schemes: (1) substantial start-up costs, (2) the potential for participants to be stuck with large amounts of unsold inventory, (3) few or no sales to consumers, and (4) compensation based predominantly on recruitment rather than product sales. Similar terms include "Ponzi scheme, chain letter scheme, endless chain scheme."

 Rally. Scheduled meetings of direct sellers for voluntary training, recognition, and motivation.

 Recruiting. The act of communicating with a person who wishes to become an independent dealer. See "sponsoring."

 Referral sale. An illegal scheme in which consumers are led to believe that the purchase of a product will be reduced if the customer gives the seller names of other people who purchase the same product.

 Referrals. Names of individuals who may be interested in purchasing a product. They are provided to a seller by a customer, through advertisement, etc.

 Sales campaign. An organized sales promotion with a specified time duration.

 Seamless Compensation Plan. A compensation structure that is not limited by geographic boundaries but allows distributors and members of their downline organisations to participate and be compensated for business activity that distributors or their downline organizations create, in every market where the company operates.

 Sponsor. The direct seller who has brought another person into his organization as a salesperson.

 Sponsoring. The act of bringing new salespeople into an organization. See "recruiting."

 Upline. All independent contractors in a direct line toward a company responsible for the individual salesperson's involvement.

 Seldia - The European Direct Selling Association. Seldia is the representative body for the direct selling sector in Europe, whose members include 27 European Direct Selling Associations (DSAs), 22 of which in EU Member States and 13 companies. seldia represents directly through its corporate members and indirectly through the national associations over 1,000 direct selling companies with annual sales in excess of 20.0 billion Euro and 12 million independent direct sellers. seldia's main purpose is to represent the interests of the direct selling sector to the European Union legislator.

 World Federation of Direct Selling Associations (WFDSA). WFDSA is a non-governmental, voluntary organization globally representing the direct selling industry as a federation of national Direct Selling Associations. Its membership is composed of more than 56 national direct selling associations in over 56 markets and one regional association, Federation of European Direct Selling Associations. The WFDSA mission is to build understanding and support for direct selling worldwide.

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