Definition of commonly used terms – Developed by Strategy India


Direct selling - Marketing and Retailing of products to people in places other than fixed retail locations.
It’s primarily a B2C (Business to consumer) model with some exceptions (where the agreement is made between the Direct selling company and an Entity/Organization- Proprietary, Partnership, Limited liability Partnership, Private limited, Trust, Public limited, etc.)

Also known as Direct sales, Network marketing, Referral marketing, Affiliate marketing, etc.

Company - A business organization that manufactures or buys and sells products or provides services in exchange for money, i.e., the organization may be a manufacturer or a trader of the product/s.

Direct selling company - The company which utilizes the services of self-employed Individuals (or direct seller as per the definition) to recommend and retail product/s. The company may calculate incentives/commissions to the direct sellers by deploying Direct compensation plan or Single level marketing compensation plan or Multi-level marketing compensation plan to calculate incentives / commissions.

Direct seller - Any person (or an entity / organization formed specially to engage in direct selling) above the age of 18 years on the date of enrolment or a legal entity entitled to do business with eligibility to enter into a business contract who/which enrol/s with the direct selling company for gainful association including but not limited to purchasing the product/s at a discount for self-consumption and / or earn money by retailing product / s and / or by helping others earn money by doing the same.(Where the organization may be a Proprietorship / Partnership / LLP / Private limited) A direct seller may be a consumer or a reseller or both.

Direct sellers are commonly knowns as distributors, associates, independent business owners, consultants, networkers, members, advisors, independent business associates, affiliates, independent representatives, etc.

Enrol - introduce / register / signup formally as a participant or an individual including any names mentioned under the definition of a direct seller.

Active Direct seller is a direct seller whose minimum monthly purchase from the company is worth INR.50 or above as per the criteria of the direct selling company.

Consumer - The term consumer refers to any person/s to whom selling activities are directed, whether as an individual or as an organization (a group of individuals) as an end user.

  • Buys any product for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
  • hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purposes;
  • Explanation - for this clause, "commercial purpose" does not include use by a person of goods bought and used by him and services availed by him exclusively to earn his livelihood using self-employment.
  • The "Consumer" may or may not be a direct seller himself/herself.

Product - The term product refers to anything, goods or services, tangible or intangible that constitutes the subject of an intended direct selling transaction.

Network structure / Tree structure / Marketing organization – The way of representing the tiered nature of the direct sellers in a graphical form to help them recognize their relative positions to the company / direct sellers above / below them.

Types of Network Structures of Direct Sellers

Types of front line (or leg) structures (maximum number of direct sellers in the frontline):

Where Front line direct sellers mean the Direct sellers mapped directly with the direct seller in his Network Structure / Tree structure / Marketing organization are known as the front line direct seller/s.

  • Binary – Maximum two direct sellers in the frontline
  • Trinary – Maximum three direct sellers in the frontline
  • Fixed Matrix – Maximum four or five or X (where 'X' is fixed as per the compensation plan of the company) direct sellers in the frontline
  • Infinity – No limit on the number of direct sellers placed in the frontline.

Types of Generation (or Level) Structures (of Direct Sellers):

A company may choose to have the direct sellers structured in a Direct, Single level or a Multi-level structure.
Generation is generally referred to as level.

  • Direct - Directly connected to the company
  • Single level – The Direct Sellers are connected to the company via another individual who may be a Direct Seller or an employee
  • Multi-level – The Direct Sellers are connected to the company via multiple generations of Direct Sellers

Incentive / Commission - Material remuneration to an individual in exchange for acting in a particular way.

Compensation plans – A method to calculate the commissions/incentives and/or the rewards to be given to/among direct seller/s from the turnover achieved by them and/or their marketing organization.

The Compensation plans encourage different types of behaviours – Personal purchase for self-consumption or retail, Supporting the direct sellers in their marketing organization for sales, Enrolling individuals (though offering compensation on enrolment of individuals is deemed to be an immoral practice), etc.

Types of Compensation Plans

Types of Compensation Plans (Paid on Generation/s):

  • Direct – Only the direct seller using/consuming or selling the product/service gets incentivized. This type of compensation plan is deployed for a single level structure.
  • One generation / Single generation - The direct seller gets compensated on the sales done by the direct sellers directly connected with them. This type of compensation plan is/may be deployed by companies having direct sellers in a single level structure or multilevel network structure
  • Two generations - The direct seller gets compensated on the sales done by direct sellers in his/her first and the second generation. This type of compensation plan is/may be deployed by companies having direct sellers mapped in a multilevel network structure.
  • Three generations - The direct seller gets compensated on the sales done by direct sellers connected within three generations. This type of compensation plan is/ may be deployed by companies having direct sellers mapped in a multilevel network structure.
  • Five generations - The direct seller gets compensated on the sales done by direct sellers connected within five generations. This type of compensation plan is/may be deployed by companies having direct sellers mapped in a multilevel network structure.
  • Multiple generations - The direct seller gets compensated on the sales done by direct sellers connected with them in multiple generations. This type of compensation plan is/may be deployed by companies having direct sellers mapped in a multilevel network structure.

Types of Compensation Plans (Level/Rank/Title achievement):

  • Non-cumulative - The direct sellers, regardless of their levels/ranks/ titles in the previous month start a fresh calendar month with the same level/rank/title as the others.
  • Cumulative – On achievement of any level/rank/title the direct sellers continue to enjoy the privileges meant for the highest rank attained through their compensation will be calculated on the sales of that calendar month/week.

The frequency of Compensation Pay-outs:

  • Weekly - Pay-out is calculated and disbursed weekly
  • Monthly – Pay-out is calculated and paid once a month

Quality - The ability to perform satisfactorily in service and is suitable for its intended purpose. As indicated in the literature including brochures, labels, and presentations developed / distributed / retailed by the company.

Satisfaction guarantee - The promise to the consumer to empower him/her to return the product if he/she does not get the results as per the expectations. This policy is to address the concerns of issues regarding the quality of the product/s.

Money back guarantee - The promise to the direct seller to empower him/her to return the goods if he/she is unable to sell the purchased product/s to the consumer/s or use them for self-consumption. This policy is to address the concerns of overstocking of products by the direct sellers.

Direct marketing - A method in which companies communicate directly with the consumers through formats like online advertisements, direct mailing (postal mail and email), text messaging and telemarketing.

Ecommerce - The Sale or purchase of goods or services conducted using the internet. This method of distribution may or may not be a part of the direct selling model.

Virtual currency (also known and circulated in the form of Cryptocurrency, e-currency, emoney, electronic cash, electronic currency, e-vouchers, digital money, digital cash, virtual cash, digital currency, cyber currency or any other name) is money that is only exchanged/redeemed

  • Virtual currency is generated by the company against monies due to the direct sellers which can be used to purchase products from the company.
  • A cryptocurrency is a digital currency that is generated by using computers to solve cryptographic puzzles while the transactions are done using cryptography. This currency may or may not be created and/or backed by any collateral or any government.