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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. 
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. 
Buyback Policy 
A policy required by the DSA Code of Ethics, the policy requires member companies to re-purchase 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. 
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. 
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." 
Dealer/Representative 
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 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 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. 
Host/hostess 
Person who invites friends and neighbours to attend a sales party in his or her home. 
Incentives 
A reward offered to salespeople for achieving desired performance goals. 
Internal Consumption 
The purchase and use of product by individuals who sell for direct selling organisations 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 re-purchase. See, "buyback policy." 
Managers 
Field supervisory personnel who may also sell products directly to consumers. They may be independent contractors themselves, or company employees. 
Multilevel 
Sometimes known as MLM, this is a structure by which the company compensates the independent direct sales representative not only for the sales he/she personally generates, but also for the sales of others in his/her recruited group. This type of compensation is received in addition to retail profit, which is the differential between the wholesale price of an item and the retail sales price. 
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. 
Party plan 
A sales presentation made to a group of individuals (guests), invited by the homeowner (host/hostess). 
Personal volume (PV) 
The total of commissionable product sold by a direct seller in a given period. 
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. 
Single Level 
Sometimes known as SLM, this is a structure by which the company does not compensate the independent contractor for sales he/she generates. Instead, the independent contractor earns money by generating retail profit, which is the difference between the wholesale price of an item and the retail sales price. 
Sponsor 
The direct seller who has brought another person into his organisation as a salesperson. 
Upline 
All independent contractors in a direct line toward a company responsible for the individual salesperson's involvement. 
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. 
Booking 
Creating an interest in and setting a definite date for holding an in-home demonstration. 
Business volume (BV) 
The assigned value of each product purchased or sold by a direct seller. Business volume is often different from the amount paid for the product and is used to determine advancement and bonus qualification of the direct seller. 
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, adapted to reflect UK legislation. Codes exist at national and European level. 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." 
Compensation Structure 
The means by which a Direct Selling independent contractor is compensated. This may be through these types of structures: 
Cooling-Off and Return of Good 
Provision in the Code of Ethics which requires all UK member companies, 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. 
Direct Seller 
“A person who is part of the distribution system of a direct selling company and who sells, facilitates or assists in the sale of products of that company away from business premises, typically in the consumer’s home … or place of work.” [Source: European Codes of Conduct for Direct Selling dated 5/10/2011] 
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." 
Downline 
Direct sellers sponsored one or more levels away from another in a directly linked line. 
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. 
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. 
Leads 
Names of individuals who may have an interest in purchasing a product or service or in becoming distributors themselves. 
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. 
Organisation 
The number of all independent contractors in a subject's downline. 
Override 
The compensation received by a direct seller on the sales made by individuals whom he or she recruits, trains, motivates, and assists. 
Prospect 
A person identified by a direct seller as someone he or she wishes to sponsor into the direct selling business. 
Pyramid scheme 
Direct selling or network marketing should not be confused with Pyramid Selling. Pyramid selling is illegal in the UK and many other countries and is a type of fraud which is disguised to look like direct selling. Pyramid selling is where recruits pay an admission fee to join the scheme to earn commissions on persuading other to join rather than supply any real investment or sale of products or services to the public. Pyramid schemes do not offer contracts to participants, cancellation rights nor the opportunity to buy back unsold goods - all of which are required under UK law.  
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 Method or Approach 
The means by which a Direct Selling independent contractor approaches his/her customer/consumer. This may be through: 
Face-to-Face or Person to Person Sales 
The one-to-one sale of a product or service between the Direct Selling independent contractor and a single customer/consumer. 
Party Plan / Group Selling / Home Demonstartions 
The sale of a product or service by a Direct Selling independent contractor in a small group of customers, class or party setting, often in the home of a hostess. 
Sponsoring 
The act of bringing new salespeople into an organisation. See "recruiting." 
 
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