Part of the guide: Network Marketing Lead Generation
I’ve been in this industry part-time since 2002. Over twenty years of watching comp plans, launches, “momentum,” and collapse. And if you gave me one number to judge whether a network marketing company has a real business underneath it, I wouldn’t ask about volume. I wouldn’t ask how many people joined last month. I’d ask one thing:
What percentage of customers order again — without being on a team, without being pitched, without an autoship they forgot to cancel?
That’s reorder rate. It’s the closest thing this industry has to a lie detector.
It’s also the metric most people calculate wrong, present wrong, and get talked out of. So this post is about the mistakes — because the metric only works if you refuse to let it be gamed.
In this guide
- Why reorder rate matters more than volume
- Mistake #1: Counting distributor purchases as customer reorders
- Mistake #2: Treating autoship retention as demand
- Mistake #3: Measuring over a window that hides churn
- Mistake #4: Confusing a good reorder rate with a good opportunity
- Mistake #5: Accepting the number without asking who calculated it
- Mistake #6: Not running the test on your own customers
- What a real reorder number changes about how you build
- The uncomfortable summary
Why reorder rate matters more than volume
Volume tells you money moved. Reorder rate tells you money moved because somebody wanted the product.
Those are different questions, and the FTC has been explicit that the second one is what determines whether a business is legitimate. In its Business Guidance Concerning Multi-Level Marketing, the FTC states that “at any given time, most participants should make money” and that a company’s compensation should be “based on actual sales to real customers, rather than based on mere wholesale purchases or other payments by its participants.” (ftc.gov)
Read that again: sales to real customers. Not sales to hopeful distributors. The FTC also notes that in a legitimate MLM, “the amount of a participant’s rewards should depend on their sales of products to consumers, not on the amount of their own purchases or those of the participants they recruit.”
Reorder rate is how you measure that from the outside. A product with real demand generates repeat purchases from people who have no financial incentive to buy. A product without real demand generates repeat purchases from people who need volume to qualify for a check.
Same dollars. Completely different business.
Mistake #1: Counting distributor purchases as customer reorders
This is the big one, and it’s usually not a lie — it’s a definition problem.
Most comp plans let a distributor also be a customer. Which is fine. But it means the company’s “reorder rate” can quietly include every rep who bought their monthly qualification order. If 80% of your volume comes from people whose commissions depend on that purchase, you haven’t measured demand. You’ve measured compliance with your own comp plan.
How to fix it: Ask for reorder rate on preferred customers or retail customers only — people with no position, no downline, no qualification requirement. If the company can’t segment that, that’s your answer. Every modern back office can segment it. Not being able to is a choice.
I go deeper on this distinction in the complexity trap and what a real customer actually is, because once you internalize it, half the industry’s marketing stops working on you.
Mistake #2: Treating autoship retention as demand
Autoship is a great convenience feature and a terrible measurement tool.
Here’s the mechanism: autoship converts an active decision into a passive one. The customer decides once, and then inertia decides for eleven months. That’s real revenue — but it’s not the same signal as someone logging in, choosing to buy, and paying again.
The tell is what happens at cancellation. If a company makes cancelling hard, buries the option, or requires a phone call during business hours, they’re manufacturing reorder rate out of friction rather than satisfaction. That’s not just a bad metric — it’s a legal exposure. The FTC’s Negative Option Rule work and its long-running enforcement on recurring billing centre on exactly this: consumers must be able to cancel as easily as they signed up. (ftc.gov on negative option marketing)
How to fix it: Ask for two numbers. Reorder rate including autoship, and reorder rate from manual, non-autoship purchases. The gap between them is your inertia tax. A healthy product has meaningful manual reorders. A weak product has almost none.
Mistake #3: Measuring over a window that hides churn
“85% reorder rate” over what period?
A 30-day reorder rate on a 30-day consumable product is nearly meaningless — you’re capturing one cycle, most of which is autoship. The interesting question is month six. Month twelve. Second year.
Churn hides in short windows. If your product has a genuine benefit people notice, retention should hold past the honeymoon. If it doesn’t, you’ll see a cliff somewhere between month three and month six, right about when the initial enthusiasm and the initial bottle both run out.
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How to fix it: Ask for a retention curve by cohort — of customers who ordered in January, what percentage were still ordering in July? Cohort retention is standard practice in any subscription business. If nobody at the company has ever produced one, you’re not talking to a product company.
Mistake #4: Confusing a good reorder rate with a good opportunity
This one stings, because it’s the mistake I see sharp people make.
A strong reorder rate means the product is real. It does not mean the comp plan pays you, the market isn’t saturated, the pricing leaves room for retail margin, or the company won’t change the plan next year. Real demand is a necessary condition, not a sufficient one.
I’ve written honestly about why I stepped back from doing network marketing seriously — and part of it was realizing that product quality and opportunity quality are separate variables that people insist on collapsing into one.
Check both. Separately.
Mistake #5: Accepting the number without asking who calculated it
Reorder rate isn’t audited. Nobody certifies it. It comes from the company, is repeated by uplines, and by the third retelling it’s grown ten points and lost its definition.
Before you use the number for anything, ask four questions:
- Numerator: who counts as a reorder — any second purchase ever, or a purchase in a specific window?
- Denominator: all customers, or only customers who made it past a first successful order? (Excluding failed first orders inflates the number substantially.)
- Segment: distributors included or excluded?
- Source: back-office report, or a slide from a convention?
If the answers are vague, treat the number as marketing copy. Vague metrics are one of the patterns I list in MLM red flags — not because a vague number proves fraud, but because companies with good numbers are specific about them.
Mistake #6: Not running the test on your own customers
You don’t need the company’s data. You have your own.
Take the customers you personally enrolled at least six months ago. Count how many bought again in the last ninety days without you asking. That’s your reorder rate. It’s a small sample and it’s the most honest number you will ever see about your business, because you know exactly which purchases were demand and which were you being persuasive.
Most people never run this. The ones who do change what they sell, or how.
What a real reorder number changes about how you build
Once you have an honest reorder rate, your whole strategy shifts.
High manual reorder rate means you can build on customers. Fewer recruits, more buyers, less pressure — and a business that survives you taking a month off. That’s the model I’d point anyone toward, and it’s the same reason recruiting professionals works better than recruiting anyone with a pulse: professionals ask about reorder rate before they join, and companies with real products welcome the question.
Low manual reorder rate means the money in your comp plan is coming from people entering, not people consuming. You already know what that structure is called, and you already know how it ends. The pattern doesn’t change when it wears new clothes — I wrote about how the same playbook migrated into crypto and prediction markets wearing entirely different language.
The uncomfortable summary
Reorder rate is the metric that decides whether you’re in a product business or a recruiting business. It’s also easy to fake, and almost every way it gets faked is a definition trick rather than a lie: distributor purchases folded in, autoship inertia counted as choice, a window short enough to hide the cliff.
Ask for the segmented number. Ask for the cohort curve. Ask who calculated it. And run the test on your own customers, because that’s the version nobody can spin.
If you want the rest of how I think about building this way — customers first, honest numbers, no urgency theater — start here.
— David Wood
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Mistake five lists four questions to ask about how the number was calculated. Which of those four is the one most companies actually refuse to answer?
The best case against Ivy’s question, if I’m arguing it: maybe companies don’t answer because the honest answer is ‘it varies by product line and nobody’s built the report,’ not because they’re hiding something. Absence of an answer isn’t automatically evidence of concealment. I don’t actually think that holds up once you notice the article’s own point — that not being able to produce the number is itself the finding — but it’s the strongest version of the defense.
Walt’s charitable read is fine as far as it goes. Fine. But ‘nobody built the report’ stops being charitable the third time you ask and get the same shrug. At some point not building the report is a decision, not an accident. Which mistake in this list is that — three, or five?
Ivy, in my experience it’s the denominator question every time — whether it’s all customers or only customers who survived a first successful order. Nobody in twenty-two years of corporate reporting ever lied to me about a numerator. The denominator is where every impressive number I was ever handed turned out to be quietly excluding the people who’d make it look worse, and nobody flagged it because ‘the number went up’ was treated as the whole conversation.