Primer of Direct Sales Terms

Find out what all the technical terms in direct selling means.

If you're considering starting a direct sales business, go in with your eyes open. While most direct sales businesses are legit operations, they can be fronts for pyramid schemes or other work at home scams. If you plan to sign a contract with a company be sure you understand the terminology that may appear on it.

  • 01 of 09

    Direct Sales (or Selling)

    Direct Sales party
    Getty/Steve Debenport

    The terms direct sales or direct selling can be used interchangeably. They describe a business operation in which sales reps sell products and services directly to customers without the use of a retail outlet. Direct sales often take place through on-on-one contact--such as home parties--but sales can also be done via phone or other electronic means. Most direct selling companies are also multi-level marketing organizations, which compensate sales reps for both product sales and for recruiting...MORE other sales reps.

    Direct selling (also known as direct sales) is a form of marketing in which products and services are sold directly to consumers without the use of a fixed retail outlet. Direct sales take place through person-to-person contact, often at home parties hosted by the distributor, who can also be known as a sales representative, associate and/or consultant.

    Most direct selling operations are also multi-level marketing organizations, which feature compensation arrangements in which sales reps earn money for both product sales and for recruiting other sales reps.

  • 02 of 09

    Multilevel Marketing (MLM)

    Multilevel marketing (MLM) is a business structure in which products are marketed directly to consumers by sales representatives (or distributors) whose compensation is based on their own product sales as well as the sales of the distributors whom they recruited to the multilevel marketing company. These recruits are called their downline. MLM sales reps do not receive a salary.

  • 03 of 09

    Distributor

    In multilevel marketing operations, sales agents are referred to as distributors. Depending on the organization a MLM distributor might be called an agent, sales representative or a consultant.
  • 04 of 09

    Downline

    Downline are the distributors that another distributor has recruited to the direct sales organization. The recruiting sales rep receives compensation based on her downline’s sales as well as her own. In an MLM, the recruiting sales rep receives compensation based on her downline as well as own sales.

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  • 05 of 09

    Upline

    In multilevel marketing (MLM), the person who recruited a distributor into the organization, sometimes known as a sponsor, and the people above her in the organization are the upline. A MLM distributor’s upline receives compensation based on her sales as well as their own.

  • 06 of 09

    Single-Level Marketing

    Single-level marketing (or sales) is one type of compensation plan for direct sales companies. Multilevel marketing, however, is far more common. In SLM sales associates are paid only for their own personal sales activity. They do not recruit other sales reps and derive income. Income is only in the form of commission or bonus.

  • 07 of 09

    Pyramid Scheme

    In this type of illegal business structure, recruitment of new members into the pyramid scheme is main avenue for compensation for participants. Typically new recruits pay an initial fee of some kind, which becomes income for their upline. The path to compensation for that recruit is to recruit a downline. Usually there is a front for a pyramid scheme that gives the appearance that the compensation can be earned from something besides other than recruitment. Know the telltale signs of a scam.

  • 08 of 09

    Party plan

    This is sales of a product through home parties in which the direct sales distributor either host a party in which guests can purchase the product or recruits a host to hold a party. At these home parties the distributor makes a sales pitch and guests can browse the merchandise or place orders.
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  • 09 of 09

    Network marketing

    This refers to direct sales made person-to-person, not at a home party. These sales can be done face to face but also via phone or electronic means.