Commonly used terms in Direct Selling – Ideated and Developed by Strategy India


"Guidelines" is the compilation of instructions issued to assist the companies to observe self-control for maintaining ethical business practices and to avoid being booked under "The Prize Chit and Money Circulation Banning Act 1978", "The Banning Act 2017" or various acts in states including MPIDA, TNPIDA, OPIDA etc.


"Consumer" refers to any person/s whether as an individual or as an organization (a group of individuals).

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,


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 who purchases the goods or services to use/consume them butthe goods or services are purchased exclusively to earn his livelihood using self-employment.

The "Consumer" may or may not be a direct seller.

(with inputs from Consumer Protection Act)

Direct selling

"Direct selling" is the 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 entered into between the Direct selling entity and an Entity / Organization- Proprietary, Partnership, Limited liability Partnership, One person company / Private limited, Trust, Public limited, etc.)

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


"Company" is 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

"Direct selling company" is a company which utilizes the services of self-employed individuals known as direct sellers as per the definition of direct seller to recommend and retail product/s.

The company may commit, calculate and pay incentives / commissions to the direct sellers by deploying Direct compensation plan or Single level marketing compensation plan or Multi-level marketing compensation plan.

Direct seller

"Direct Seller" is an individual or an entity / organization (formed specially to engage in the act of 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 through a legally enforceable written contract to undertake direct selling business on principal to principal basis 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 / OPC / Private limited).

A direct seller may be a consumer / user or a customer / purchaser / buyer or a reseller or all of the three.

Direct Sellers are also known as Distributors, Associates, Independent business owners, Consultants, Networkers, Members, Advisors, Independent business associates, Affiliates, Independent representatives, etc.

Active direct seller

"Active Direct seller" is a direct seller whose monthly purchase from the company exceeds INR.50.


"Prospect" is a person to whom an offer or a proposal is made by the Direct Seller to join a Direct Selling opportunity or to purchase goods or services.


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


"Saleable" with respect to goods and / or services, means unused and marketable, unexpired and undamaged


"Price" is the money consideration for a sale of goods.


"Quality" is 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. Quality of goods includes their state or condition.

Satisfaction Gurantee

"Satisfaction guarantee" is 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 or as promised/claimed by the company. This policy is to address the concerns of issues regarding the quality of the product/s.

Money back guarantee

"Money back guarantee" is 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.

Negative product list

"Negative product list" is the list of products / services which are not to be promoted by the company deploying a Direct / Single level / Multilevel marketing compensation plan.

Special product list

"Special product list" is the list of products / services which may be promoted along with the conditions mentioned along with them.


"Delivery" is a voluntary transfer of possession from one party to another.


"Office" a room, set of rooms, or building used as a place of exclusively conducting business activities.


"Enrol" is to introduce / register / signup formally through a legally enforceable written contract to undertake direct selling business on principal to principal basis as a participant or an individual or any entity including any names mentioned under the definition of a direct seller.

Marketing organization

"Marketing organization" is 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 or direct sellers above or below them.

Also known as the Tree structure or Network Structure.

Types of Marketing organization of Direct Sellers

1. Types of frontline (or leg) structures (maximum number of direct sellers in the frontline):

Direct sellers mapped directly with the direct seller in his marketing organization are known as the frontline direct seller/s.

i. Binary – Maximum two direct sellers in the frontline

ii. Trinary – Maximum three direct sellers in the frontline

iii. 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

iv. Infinity – No limit on the number of direct sellers placed in the frontline.

2. 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 as level.

i. Direct - Directly connected to the company

ii. Single level – The Direct Sellers are connected to the company via another individual who may be a Direct Seller or an employee

iii. Multi-level – The Direct Sellers are connected to the company via multiple generations of Direct Sellers

Compensation plan

"Compensation plan" is 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 behaviors – 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.

This is also known as Remuneration system

1.Paid on Generation/s:

i. Direct – the direct seller using / consuming or selling the product / service gets incentivized on his / her personal purchases. This type of compensation plan is deployed for a single level structure.

ii. 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.

iii. Multiple generations - The direct seller gets compensated on the sales done by direct sellers connected with them in more than single generation (multiple generations).

2. Level / Rank / Title achievement:

i. Non-cumulative - The direct sellers, regardless of their levels / ranks / titles in the previous month start a fresh calendar month with the same levels / ranks / titles.

ii. Cumulative – On achievement of any level/rank/title the direct sellers continue to enjoy the privileges meant for the highest rank attained although their compensation is calculated on the sales for that specific period.

3. Frequency of Compensation Pay-outs:

i. Weekly - Pay-out is calculated and disbursed weekly

ii. Monthly – Pay-out is calculated and paid once a month

Virtual currency

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

Virtual currency may be generated by the company against monies due to the direct sellers which can / may be used to purchase products from the company.


"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.

Pyramid Scheme

"Pyramid Scheme" means a multi layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit directly, as a result of enrolment of additional subscribers to the scheme. The subscribers enrolling further subscriber(s) occupy higher position and the enrolled subscriber(s) occupies a lower position, thus, with successive enrolments, they form multi -layered network of subscribers.

Money Circulation Scheme

"Money Circulation Scheme" means any scheme, by whatever name called,for the promise of quick or easy money, or for the receipt of any money or valuable thing as the consideration on any event applicable to the enrolment of individuals into the scheme or on investments by the individuals as a consideration for a promise of returns for their investments. It also includes a promise of quick or easy money, which is not arithmetically viable or may not be related to sale of products by the participants or their marketing organization.

Direct marketing

"Direct marketing" is 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" is the  sale and / or purchase of goods or services conducted using the world wide web.

This method of distribution may or may not be a part of the direct selling model.