MLM Glossary: 70+ Network Marketing Terms

Compensation plan documents use these terms as though they were self-explanatory, and vendors use them as though they were interchangeable. They are not. Sponsor is not placement, BV is not PV, and paid-as rank is not achieved rank — and each of those confusions has a specific operational cost.

Definitions below are the common industry usage. Where usage varies between companies, that is noted, because a plan document should always define its own terms.

Structure and genealogy

Distributor — an independent salesperson contracted to sell the company’s products. Also called consultant, representative, associate, partner or brand ambassador. Not an employee, which matters for tax, benefits and liability everywhere.

Sponsor — the distributor who recruited a given person. Drives sponsorship and matching bonuses and personal-recruit qualification counts.

Enroller — in some plans, distinguished from sponsor: the person who processed the enrollment, where that differs from the person credited with recruiting.

Upline — everyone above a position in the tree, up to the top.

Downline — everyone below a position.

Frontline — the positions directly beneath you, at level 1. Its width is unlimited in a unilevel, two in a binary, fixed in a matrix.

Leg — one branch of a downline viewed from a given position. A binary distributor has two; a unilevel distributor has as many as they have frontline positions.

Level — how many steps below you a position sits.

Depth — how many levels a plan pays on. Distinct from structural depth, which is unlimited.

Width — how many positions a level can hold. Capped in binary and matrix plans.

Genealogy — the stored tree of relationships. The core data structure of the business.

Placement — where a position physically sits in the tree, determining who earns level commissions on its volume. Frequently not the same as sponsor. See upline and downline for why both must be stored separately.

Spillover — a position placed beneath someone other than their sponsor, because the sponsor’s frontline was full.

Forced placement — the rule that determines where overflow goes when a frontline is full, usually left-to-right and top-to-bottom. Must be deterministic and recorded.

Compression — closing the gap left by an inactive or unqualified position so the levels below move up for commission purposes.

Dynamic compression — compression evaluated per commission run against that period’s qualification state, so the effective tree differs every period.

Orphan position — a position whose upline has terminated, requiring a reassignment rule.

Re-entry position — a new position granted to a distributor whose matrix or board completed, letting them build again.

Volume

Commissionable Volume (CV) — the value a commission percentage is applied to. Almost always lower than retail price, because paying commission on shipping and tax is a pure loss.

Business Volume (BV) — usually a synonym for CV. Usage varies by company.

Point Value (PV) — often a separate scoring figure used for rank qualification rather than for paying commission. Sometimes used interchangeably with personal volume, which is why plan documents must define it.

Personal Volume — volume from a distributor’s own sales and, depending on the plan, their own purchases.

Group Volume (GV) — total volume from a distributor’s whole organisation within the counted depth.

Team volume or leg volume — volume within one leg. The input to a binary’s weaker-leg calculation.

Qualifying Volume (QV) — the subset of volume that counts toward a qualification threshold. Often excludes certain product lines or self-purchases above a cap.

Autoship — a recurring scheduled order. Stabilises volume and reduces qualification failures; also the mechanism most likely to produce participant purchases made purely to qualify, so it needs to be visible in retail-ratio reporting.

Qualification and rank

Active — meeting the period’s minimum activity requirement, usually a personal volume threshold. A precondition for earning at all.

Qualification — the full set of conditions to earn a given bonus in a period: personal volume, active leg counts, rank maintenance, compliance standing.

Rank — a qualification tier that unlocks bonuses. A recalculated state, not an awarded badge.

Rank maintenance — the requirement to re-meet a rank’s conditions each period to keep being paid at it.

Paid-as rank — the rank actually qualified for in the current period. Determines pay.

Highest achieved rank — the highest rank ever reached, generally kept for recognition. A distributor can hold a title while being paid lower.

Breakaway — a mechanism in which a distributor reaching a rank separates from their upline’s group volume, replaced by a differential or generation bonus.

Differential — the difference between two distributors’ payout percentages, paid to the upline. Common in breakaway plans.

Commission and bonus types

Retail commission — margin on a sale to a customer the distributor served directly. The component regulators regard most favourably.

Fast start bonus — an elevated payout on a new distributor’s first orders, usually funded from enrollment pack margin.

Level commission — a percentage of downline volume, per level, to the paid depth.

Generation bonus — paid by generation rather than by level, where a generation ends at the next rank-qualified distributor in a leg, making depth dynamic.

Matching bonus — a percentage of what your personally sponsored distributors earned. Cheap to describe, multiplies quietly.

Rank advancement bonus — a one-time payment on reaching a rank.

Pool bonus or share bonus — a fixed percentage of company volume divided among qualifiers. The only component with a hard cost ceiling by construction.

Infinity bonus — a percentage paid to unlimited depth, usually until it meets another qualifier of equal rank.

Cycle bonus — in a binary, the payment triggered when matched volume reaches a cycle threshold.

Weaker leg — the lesser of two legs’ volume in a binary, including carry. The basis for the commission.

Carry-forward — the stronger leg’s unmatched excess, retained for future periods. A real liability, not waste.

Cycle cap — the maximum a position can earn per cycle or period from binary commission. The only hard ceiling in most binary plans, and it must be evaluated after carry is applied.

Earnings cap — a per-period ceiling on total earnings from any source.

Flushing — removal of accumulated carry-forward, usually on failing activity requirements or after a stated age. The most disputed mechanic in binary plans; must be stated in the plan document and applied by the engine.

Coded bonus — a bonus where a distributor is permanently “coded” to whoever met a condition first, paying that person regardless of level.

Rollup — commission that would have gone to an unqualified position passing up to the next qualified upline. Distinct from compression, though frequently conflated with it.

Commission run mechanics

Commission run — the periodic calculation that turns volume into payable amounts. The single most consequential process in the business.

Commission period — the interval a run covers: weekly, biweekly, monthly, or a mix by bonus type.

Closed period — a period whose run has been finalised and paid. Must be reproducible: after the rules change, re-running it should still return what was actually paid. Covered in commission software.

Rule version — the plan configuration in force for a given run. Must be recorded with the run, or closed periods cannot be reproduced.

Reversal — an adjustment removing commission because the underlying volume was invalidated.

Clawback — recovery of commission already paid, following a return, cancellation or chargeback.

Chargeback — a payment reversed by the cardholder’s bank. Triggers a clawback and usually a fee.

Holdback or reserve — a percentage of earnings withheld for a period to cover expected returns and chargebacks.

Commission statement — the field-facing breakdown of what was earned and why. If the field cannot understand it, it becomes your support load.

Payout threshold — the minimum balance before a payout is issued.

E-wallet — an internal balance holding earnings before withdrawal.

Payout provider — the third party executing payments. Direct selling is a higher-risk category for both card processing and payouts, which affects onboarding.

Back office — the distributor-facing portal: genealogy, volume, rank progress, statements, orders.

Replicated site — a distributor’s personalised copy of the company storefront, carrying their tracking so orders attribute correctly.

Compliance vocabulary

Retail sales requirement — the principle that a substantial share of volume must go to genuine end consumers rather than to participants buying to qualify. See MLM vs pyramid scheme.

Inventory loading — participants buying more than they can use or resell in order to hit a threshold. A primary indicator that compensation is driven by participant purchases.

Buyback policy — the commitment to repurchase unsold resalable inventory within a stated window at a stated percentage. A return must reverse the commission it generated.

Income Disclosure Statement (IDS) — the published document reporting typical distributor earnings, with the basis stated.

Earnings claim — any representation about income, including lifestyle imagery and implication. In the US a distributor’s social media post is treated as the company’s marketing.

Cooling-off period — a statutory window in which a consumer may cancel a direct sale. A cancellation must reverse both the order and its commission, in the correct period.

Pyramid scheme — a programme where payouts derive primarily from participation payments and recruitment rather than from sales to consumers. Illegal.

Multiplication scheme — a category named in South Africa’s Consumer Protection Act, covering offers of returns unrealistically above prevailing market rates. See is MLM legal in South Africa.

POPIA — South Africa’s Protection of Personal Information Act, governing all personal information a company processes about distributors, customers and prospects.

Information Officer — the role POPIA requires a company to designate and register with the Information Regulator.

Policies and Procedures — the rules governing distributor conduct, forming part of the contract alongside the distributor agreement.

Nexus — the connection that creates a tax obligation in a jurisdiction. Distributors selling in a state can create it, which is why tax must be calculated per jurisdiction at order level.

If a plan document you are reading does not define its own volume terms, its qualification rules and its flushing rule explicitly, that is a finding rather than an oversight — those are exactly the three places disputes originate. What each of these terms looks like as configuration rather than prose is on the compensation plan software page.