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INDUSTRY TERMS

MultiSoft has assembled and provided a comprehensive glossary of industry terms common to Multi Level Marketing (MLM), Network Marketing, and Direct Selling

Activated - (Binary)
Activated is most commonly used with Binary plans, specifically to refer to the purchase of a particular product(s) within the Binary – always the product(s) on which Binary commissions will be paid.
Active - (General)

The term Active is frequently used to indicate that an income center has attained a prescribed amount of Personal Volume (PV) in a commission period. Active is typically used as a compensation plan qualifier or for compression purposes.

Commentary: more often than not, and especially in unlimited width plan types, Active status is important with respect to compression. Refer to the “Compression” definition for an understanding of that concept.

AutoShip Personal Volume - (Australian, Breakaway, Matrix, Unilevel)

Abbreviated as APVAPV is the sum total CV purchased via an AutoShip order by a particular income center and that income center’s personally sponsored customers in the current commission period.

Note: all APV counts towards the PV tally by default; refer to the Personal Volume definition for additional information.

Commentary: AutoShip is a powerful tool for driving sales volume in the compensation plan.

Recognizing PV generated from AutoShip separate from PV generated by one off orders can be crucial to providing incentives, often times in the form of lesser commission qualifications, that encourage distributors to setup recurring orders for themselves and their constituents.

Benefit (General)
A reward – commission, bonus, title, etc. – earned for successfully meeting qualifications within the compensation plan structure.
Binary Commissionable Volume - (Binary)
Abbreviated as BCVBCV is the value of a product to count against the commission cap. During Binary commission processing, BCV for all invoices will be tallied. If the commission processing calculates company wide earnings totaling more than X% (designated cap percentage; maximum payback) of the sum total BCV present on all invoices for the period, capping of commissions will be necessary. Commentary: refer to the “Commission Cap” definition for additional information on how BCV impacts a Binary commission cap.
Breakage - (General)
Refers to any dollars that could have been paid in the compensation plan, but which no one qualified to earn. The unearned dollars are returned to the company as breakage. E.g. company X’s compensation plan pays back 75% of CV. In the current commission period, there was $1,000,000 in CV present. Because the company pays back 75%, the maximum payout would be $750,000. At the time of commissioning, $680,000 is calculated as the total company wide payout. The difference between $750,000 and $680,000 represents the dollars that could have been earned but were not. Breakage is the term used to represent the difference, in this example $70,000 that returned to the company.
Commission Cap, Global - (Binary)

A global commission cap ensures that no more than X% (variable percentage determined by company) of the total BCV invoiced for a commission period is paid out during that period’s commission calculations. Following is an example of how a commission cap works. This example is based off 60% of the BCV being the most that a company would want to pay out during a commission run.

This commission cap will ensure that no more than 60% of the BCV associated with invoices belonging to the current commission period is paid out during a Binary commission processing.

Note: only products with BCV that are found on invoices with a date inside the current Binary commission period will count towards the cap.

The mechanics of the cap are as follows. At the start of the commission run, 60% of the BCV for the current Binary commission period will be calculated. The resulting figure is referred to as the “Max Pay” – the maximum amount of commissions that it is desirable to pay out.Commissions are then calculated unencumbered without taking the commission cap into consideration. This is referred to as “Unencumbered Pay” – the total commissioning results that would be produced if no cap was in place.

Max Pay and Unencumbered Pay values will then be compared. If the Unencumbered Pay is less than the Max Pay, commissions are paid “as is” without an application of the commission cap being necessary. If the Unencumbered Pay is greater than the Max Pay, capping of the commissions will be required. To calculate what the Adjusted Pay (term for amounts paid after the cap has been applied) for each center is, the following calculation is used.

The Max Pay value is divided by the Unencumbered Pay value. The resulting amount is converted into a whole number by shifting the decimal place two positions to the right. The whole number is then subtracted from “100”. The resulting figure is translated into a percentage (called the Capping Factor) – the percentage is the amount that each check for the period must be reduced by in order to have the total payout for the period fall in line with the Max Pay value.

Example – There is $1,000,000 in applicable BCV for the period. 60%, $600,000, is the Max Pay for the period. Unencumbered Pay totals $625,000. To find the Capping Factor, Max Pay is divided by Unencumbered Pay; (600,000 / 625,000) = 0.96. 0.96 shifted two decimal places to the right is 96. 96 is then subtracted from 100 to provide the capping factor; (100 – 96) = 4, or 4%. Each check must be reduced by 4% in order to meet the overall 60% pay out goal.

Commentary: commission caps can come in different forms. For instance, some may not unilaterally reduce commission checks, they may reduce the top earners first and spare a reduction for those with lesser checks. Others may not focus the cap on a specific commission period, but rather grade the total percentage being paid over a number of commission periods.

MarkePowerPRO uses, by default, compression as defined in the definition and example above.Application of the commission cap is typically a worse case scenario. Companies generally do not wish to employ the cap – they have a vested interest in putting as much money back into the field as possible in order to maintain a motivated (read: selling) distributor force.Also refer to the personal commission cap for information on how the global commission cap interrelates to it.

Commission Cap, Personal - (Binary)

The Personal Commission Cap ensures that no more than $X is paid to any individual income center during any single Binary commission period. Earnings for any income center greater than $X are not paid to that income center, but rather returned to the general commission pool so that funds are available to pay others without the global commission cap being enacted.

The following example assumes that the personal commission cap will be $20,000. E.g. income center X earns, unencumbered, $30,000 in commissions during a Binary processing. X will be paid $20,000 only. Further, X’s unencumbered earnings of $30,000 will not count against the global commission cap. Only the earnings that X was paid, $20,000, will be counted against the global commission cap.

Commentary: Also refer to the global commission cap for a complete understanding of the capping process.

Commissionable Volume - (Australian, Breakaway, Matrix, Unilevel)

Abbreviated as CV. CV is the value of a product that Unilevel qualifications and benefits are calculated off of. E.g., if there was $100 CV present on a level of Downline and the percentage to earn on that level was 10%, the total amount paid on that level would be $10; {(100) (0.10)}.

Commentary: CV is also frequently referred to as BV, Business Volume or Bonus Volume. In almost all instances, CV and BV refer to the exact same thing, commissionable dollars

Compression - (Australian, Breakaway, Matrix, Unilevel)

Refers to the process whereby inactive income centers are temporarily removed from the Downline for the purpose of commission calculations. Active income centers in the Downline then roll up to occupy the positions vacated by the inactive centers. This effectively removes “dead spots” from the organization and makes the most volume available possible to pay commissions on.

The “Active” amount off which compression is triggered is based off PV. In many compensation plans, income centers are considered Active when they have a PV of greater than zero in the current commission period. The PV amount may, however, vary by compensation plan. For instance, “company X” may have an Active threshold of $30 PV.

Compression Example, unlimited width compensation plan – the company counts individuals as inactive only when they have not made a purchase carrying PV of any amount in the current commission period. Within the current commission period, the company has four income centers present: A, B, C and D. A is at the top of the organization. B is placed directly below A. C is placed directly below B. D is placed directly below C.

Focusing on the A position, A is Active and fully qualified to earn commissions. B is inactive. Both C and D are Active. When compression is enacted, B will be temporarily removed from the Downline. C will roll up to take B’s position and D will roll up to take C’s position. A will then be paid frontline commissions on C and second level commissions on D. After commission calculations are complete, B will again assume its position and the Downline will return to its pre-commission format.

Compression Example, fixed width compensation plan – Compression is applied on placement sponsorship lineage. When compression is applied to fixed width plans, the act of compression can break the number of frontline positions that is usually maintained. As an example, the company has a leg of Downline containing five income centers: E, F, G, H and I. E is at the top of the organization. F and G are placed directly below E. H and I both reside frontline to F. Focusing on the E position, E is Active and fully qualified to earn commissions. F is inactive. Both H and I are Active. When compression is enacted, F will be temporarily removed from the Downline. Both positions frontline to F will roll up to replace F. E will then be paid frontline commissions on G, H and I. After commission calculations are complete, F will again assume its position and the Downline will return to its pre-commission format.

Moving two (or more) centers to take the place of one compressed individual can temporarily, for commission calculation purposes only, break the rules of maximum width that are in place. If, for instance, this example belonged to a 2 wide Matrix, E would have three people frontline at the time of commissioning – G, H and I. Although this would temporarily break the normal width, it should not affect the overall payout; i.e. the company would not be at risk of breaking its maximum payback threshold, even with the compression taking place.

Customer - (General)

A customer is a person that wishes only to purchase product at retail price from the company. Customers are not eligible to build Downlines or receive commissions. Customer volume is added to that of the sponsoring income center during commission calculations; customers do not occupy a position in each level of Downline. E.g, X sponsors income center Y frontline to himself. Y in turn sponsors customer Z. Y purchases $100 CV during the commission period and Z purchases $50 CV during the commission period.

Z’s $50 CV will be added to Y’s $100 CV, placing $150 CV frontline to X at Y’s position. Z is not considered to be second level to X.

Commentary: the norm is for customers to not occupy a position in the Downline. Some companies will have a customer occupy a position in the Downline. In instances where a customer occupies a Downline position, any volume attributable to the customer is paid to the Upline from the occupied position – not through the enrolling sponsor’s position. MLM Builder does not, by default, have customers occupy positions in the Downline.

Cycle - (Binary)

The term Cycle refers to complete payment of a Binary commission. Gathering all sales required to earn a full commission and have paid upon sales flushed from the accumulated Left and Right totals is referred to as completing a Cycle.

Commentary: refer to the definition of “Step” for additional information; the term Step references incremental payout of a Cycle.

Distributor - (General)

A distributor is a person that has enrolled with the company, wishes to build Downline(s) and participate in the compensation plan.

Commentary: some companies permit distributors to have multiple income centers; refer to the “Income Center” and “Primary Income Center” definitions for additional explanation surrounding the distributor concept.

Downline - (General)
Refers to positions (distributor and customer) in the genealogy below a specific income center in the genealogy.
Enrolling Sponsor - (General)
Refers to the income center that brought an individual into the opportunity. Although an Enrolling Sponsor may be the same as the Placement Sponsor, the two do not have to match. The term “Personally Sponsored” is used to refer to those that an individual is the enrolling sponsor of.
First Generation - (Australian, Breakaway, Matrix)

An income center’s first generation is comprised of all income centers in a leg of Downline from its own position, down to but not including, the next inline income center of equal or greater rank.

Commentary: generations are often alternately defined as “down to but not including, the next inline income center of equal rank.”

Fixed Width Compensation Plan - (Binary, Matrix)
Flushing - (Binary)

Flushing refers to the process of removing accumulated volume from Left and Right sales teams in a Binary compensation plan. Some companies flush sales only when an income center has been paid commissions on those sales. Under that scenario, flushing is used as a tool to make sure an income center is not paid on the same sale twice. Other companies will limit the number of sales that an income center can accumulate and flush (remove from consideration) any sales above the prescribed threshold. Under this alternate scenario, flushing is used as a tool to limit the amount of commissions that can be paid by taking away sales before a payment is issued on them.

Frontline - (General)

Refers to an income center’s first level of Downline. Generational Continuation – (Australian, Breakaway, Matrix) The trend identified in the “First” and “Second Generation” definitions continues for the number of generations identified within the compensation plan.

Group Volume - (Australian, Breakaway, Matrix, Unilevel)

Abbreviated as GV. GV is the sum total CV (both distributor and customer purchases) present in an income center’s entire organizational Downline in the current monthly commission period.

Commentary: GV is sometimes calculated on a portion of Downline instead of the entire Downline. For instance, company X may limit GV to all CV present in an income center’s first 10 levels of Downline.

Income Center - (General)

An income center is a position in the organization that can build Downlines and participate in the compensation plan. Distributors may have multiple income centers (or not at the discretion of the company). Each income center belonging to a distributor can build its own Downline. Qualifications and benefits are calculated independently for each income center position.

Commentary: the “Primary Income Center” definition furthers the concept of income centers. Left to Right/Level by Level Spilling – (Binary, Matrix) LR/LL spilling is the most common spill type for non-Binary, fixed width type pay plans.

This spill type works as follows. When an individual sponsors a new enrollee, the first check will be to see if the sponsoring individual’s frontline is full. If the frontline is not full, the new enrollee will be placed there. If the frontline is full, spilling must occur. The LR/LL spill routine will then evaluate the second level of organizational Downline below the sponsoring individual. If available positions are present, the first position to the farthest outside left on the level will be selected for placement of the new enrollee. If there were no available positions on the second level, it would then move down one level to the third.

This spill type evaluates each level in the same fashion until the next available position is identified by asking the same two basic questions: 1. Are there any positions available on the current level (if not, go down one level)? 2. Once the level with an available position (s) has been identified, what is the first position, starting from the left and moving across the level to the right, which is not occupied?

Commentary: read the “Spilling” definition for a general understanding of the spilling concept.

Level by Level/Leg by Leg Spilling - (Matrix)

LL/LL spilling is seen as a more equitable spill type in many Matrices. This spill type works as follows. When an individual sponsors a new enrollee, the software will first check to see if the sponsoring individual’s frontline is full. If the frontline is not full, the new enrollee will be placed there. If the frontline is full, spilling must occur.

The LL/LL spill routine will then evaluate the second level of organizational Downline below the sponsoring individual. If positions are available on that level, the level will be targeted as the one on which the center being spilled should be placed. The first level with available positions is the one on which placement will occur. If only one position is available on the level, the center being spilled will be placed there. If, however, there are multiple positions available on the identified level, another series of selection routines must be undertaken in order to decide where the center being spilled should be placed. The next series of routines will determine which leg on the level the center being spilled should be placed in. To do this, each leg of the level will be checked to see the number of centers within it. The center being spilled will be placed in the leg with the least number of centers.

As an example, the level on which to spill the new center is identified within a three wide Matrix. There are three legs of Downline (three placement sponsors immediately on the level above) on this level – Leg 1, Leg 2 and Leg 3. Being a three wide Matrix, each leg can have three centers.

Leg 1 has two positions filled in it. Leg 2 has one position filled in it. Leg 3 has two positions filled in it. The center being spilled would be placed in Leg 2, because it is the leg in the level that has the least number of centers. Note: if each leg in the level has the same number of filled positions, the center will be placed in the left most leg.

Commentary: read the “Spilling” definition for a general understanding of the spilling concept. Level by Level, Left to Right and Level by Level, Leg by Leg spill types could be used for any fixed width plan types, however they are almost always used with Matrices and not Binaries.

Levels - (General)

Levels refer to layers of Downline. Those income centers that an individual is the placement sponsor of comprise the first level (or frontline). Those placed under one’s own frontline comprise the second level and so forth and so on. An income center’s own volume is not counted as being in any of its Downline levels. Customer volume is applied to that of its sponsoring income center in order to determine the position/level in the Downline that it falls in.

Personal Volume - (General)

Abbreviated as PV. PV is the sum total CV purchased by a particular income center and that income center’s personally sponsored customers in the current commission period.

Placement Sponsor - (General)

Refers to the income center that is immediately above a position in the Upline. The Placement Sponsor is not necessarily the income center that brought an individual into the opportunity – especially true in fixed width systems.

Commentary: refer to the “Enrolling Sponsor” definition for a complete understanding of the two sponsorship relationships typically tracked by companies.

PowerLeg Spilling - (Binary)

PowerLeg spilling is the standard spill type for Binary type pay plans. This spill type works as follows. Each node/position in a Binary tree has two frontline legs – one “Left” and one “Right”. When an individual is sponsoring a new enrollee into his/her Downline, the individual must choose if the new enrollee should be placed in the Left or Right side of the Downline.

If the immediate frontline position below the individual is filled on the side selected, spilling must occur. The PowerLeg spill type takes the new enrollee and places the new enrollee in the outermost left or right (depending on side selected) position below the sponsoring individual.

The PowerLeg spill type never fills interior legs of the sponsoring individual, but continues to push the newly spilled enrollee into the outermost position available on the left or right side.

Commentary: read the “Spilling” definition for a general understanding of the spilling concept.

Primary Income Center - (General)

A primary income center (or “001”) is the very first one created for a distributor, the first income center that a distributor is awarded at the time of initial enrollment. The second center generated is called the secondary income center (or “002”), the third the tertiary (or “003”) and so forth and so on.

Qualification - (General)

A condition(s) that must be met to achieve benefits within the compensation plan structure.

Qualified - (Binary)

Although the term Qualified can appear in many different plan types, this term carries the most significance within Binary pay plans. Qualified is typically the status that income centers must meet in order to accumulate volume and earn commissions within a Binary pay plan. A typical definition of Qualified is as follows:

Qualified status can be met by being personally Activated and sponsoring two other income centers, one Left and one Right, that each achieve Activated status OR Qualified status can be met by personally sponsoring three other income centers, each of whom become Activated Commentary: refer to the “Activated” definition for a complete understanding of Qualified status.

Rank - (General)

A rank is a name (e.g. Qualified Affiliate, 3 Star President, etc.) that represents the achievement of qualifications and benefits within the compensation structure. Income centers must meet the necessary qualifications to receive benefits associated with a rank each and every commission period.

Second Generation - (Australian, Breakaway, Matrix)

An income center’s second generation is comprised of all income centers in a leg of Downline from its first inline income center of equal rank, down to but not including, the second inline income center of equal or greater rank.

Spilling - (Binary, Matrix)

Refers to a mechanism that automatically determines placement sponsor positioning in fixed width compensation plans. Fixed width plans allow a finite number of income center positions on any individual’s frontline. E.g., in a 3 x 7 Matrix, no more than three income centers can be on an individual’s frontline.

Once all frontline positions below an individual are filled, any new personal enrollments must be automatically forced into the next available position in the Downline. The rules for determining which position is the “next available” comprise the definition of the spilling type employed.

Commentary: refer to the “PowerLeg Spilling”, “Left to Right/Level by Level Spilling” and “Level by Level/Leg by Leg Spilling” definitions for an understanding of the mechanics behind three common spill types.

Step - (Binary)

A incremental payout in a Binary pay plan. Many Binary pay plans will award an incremental payout of commissions while distributors work towards achieving a larger commission goal. Paying commission increments in steps helps place money in distributors’ hands quickly.

Commentary: refer to the “Cycle” definition for additional information; the term Cycle represents payout of the “larger commission goal”.

Title - (General)

An income center’s title is the name of the highest rank that the income center has ever earned within the compensation structure. Titles are permanent until a higher one is earned. Income centers are paid according to their rank, not title.

Unit Value - (Binary)

Abbreviated as UV. UV represents the sale/point value that Binary commissions are calculated off of.

E.g., a Binary compensation plan may require 2 sales or points on the weak side and 6 sales or points total in order for someone to earn a step check. The sale or point value is represented by the UV assigned to each product.

Unlimited Width Compensation Plan - (Australian, Breakaway, Unilevel)

An unlimited width compensation plan is one that does not restrict the number of income centers that can fall on any individual’s first level of organizational Downline; examples of unlimited width compensation plans are: Unilevel and Australian plan types.

Upline - (General)

Refers to positions (distributor) in the genealogy above a specific income center in the genealogy.

Volume Accumulation - (Binary)

Volume accumulation is a term associated with Binary pay plans. It specifically refers to an income center’s eligibility to accumulate (for the purpose of future commission payment) UV being sold in the Left and Right sales teams.

Different companies have different criteria surrounding eligibility to accumulate volume, however eligibility to accumulate is frequently based off Qualified status (as previously defined).

Activation

A tracking center is activated through a sale or purchase of the Company’s products or services.

Affiliate

One who has signed an Affiliate agreement and acquired the basic marketing materials.

Affiliateship

Normally consists of:

  1. A single Affiliate;
  2. A partnership (may be a husband and wife);
  3. A sole proprietor; or
  4. A corporation.
Business Plan

This is a simple layout of the STEPS you are going to use as a guideline in establishing your business. Progress with us and you will be learning how to modify your Business Plan to make it more efficient. We will provide the guiding materials through the initial steps, but as the Boss, you will make the final decision as to what the plan includes, and how it can benefit your Affiliates.

Business Tracking Center

A position in the computer’s database operated by the Company to compile and report Affiliate’s sales, qualifications, genealogy, commissions and personal information.

Center

A convenient meeting place where current and new sales ideas, product ideas and informational materials are available.

Compensation Plan

The way the sales representative or Affiliate is compensated or commissioned for direct and indirect sales made within their organization.

Crossline

When a rep or Affliate has crosslined, they have joined again in another leg under a different sponsor other than the leg they were first sponsored to. This is generally against Company Rules.

CSV - Commissionable Sales Volume

The Company will assign a sales volume credit value to each product or service. The total sales volume sold by you and your organization is then calculated and percentage or step commissions are paid.

Depth

The number of levels deep within the various stages of your DOWNLINE.

Direct Sale

A direct sale is made when a rep or Affiliate sells the product or service themselves.

Downline

All the reps, Affiliates and customers you sold directly and then sold indirectly by the reps or Affliliates linked by sponsorship under your business tracking center.

Duplication

The act of educating your Affiliates to sponsor other people. You have heard the old adage, that if you give a man a fish, you will feed him for a day, but if you teach him to fish, you will feed him for life. Replication of your efforts by new Affiliates is the backbone of our industry.

Front Line

Your first Level; the Affiliates you sponsored.

Genealogy

This is a road map of all the reps or Affiliates who are activated in the company computer starting with your tracking center. The genealogy can be printed out or viewed on the Internet through the company website.

Indirect Sale

An indirect sale is made when a person you sponsored, or is a rep or Affiliate in your organization makes a sale.

Leg

Every personally sponsored Affiliate becomes a “Leg” in your organization. A Leg can therefore consist of one person, hundreds, or even thousands of people.

MLM or Multi Level Marketing

Commissions are paid to sales representatives/Affliliates based on direct and indirect sales linked by sponsorship.

Organization

All the sales reps, distributors and customers linked by sponsorship from your downline.

Prospect

Someone you feel would be an active and dedicated Affiliate.