Products can be organized in a hierarchy based on their basic components, which shows the relationship between them. The hierarchy includes both essential components and specialized items that cater to specific needs.
It also helps customers understand the differences between products that do the same function and those with a slightly different purpose. By understanding how products are structured within the complete range of the company’s products, customers can recognize the significant advantage that can be gained by choosing one product over another.
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What is Product Hierarchy?
The product hierarchy is a model that is used to arrange products logically in a tree structure based on their hierarchical relationships. The use of a product hierarchy can assist in recognizing the similarities and differences among your products, aiding in determining the most effective marketing strategies for your goods.
Effective product hierarchy requires product classification which helps customers differentiate between products from different categories. Such a classification leads to better identification of products that suit their specific requirements.
Businesses use product hierarchy to organize their inventory for easier record-keeping. For example, if you have a range of clothing items to sell, you can use the product hierarchy to categorize them into different groups and subgroups.
A hierarchy can be used by businesses to organize their products or services, whether they have multiple offerings or just one core offering. This can help both the customer and the business better understand the structure of the offerings and improve marketing and sales efforts.
Product Hierarchy Examples
1) Apple Product Hierarchy Example
Product need
At the base of the product hierarchy, we have ‘product need’. Apple products are developed to fulfill the customer’s need for entertainment, communication, productivity, and information.
Product family
What other options does the user have to fulfill this basic need? In Apple’s case, they provide users with a wide range of products such as laptops, tablets, phones, watches, etc.
Product class
When it comes to product classes, Apple provides users with laptops and desktops that come in various sizes and options. They also provide tablets, phones, watches, and accessories such as headphones, bags, and power banks.
Product line
Within each product class are multiple product lines. For example, the Apple laptop product class includes the MacBook Pro line and MacBook Air line. The tablet product class consists of the iPad Pro, iPad Mini, and iPad Line.
Product Type
Within each product line are multiple product types — MacBook Pro 13-inch with touch bar and MacBook Pro 16-inch being examples from the laptop range. Similarly, for the tablet range, there are different product types such as the iPad Air 2, iPad Pro 11-inch, and iPad mini.
Product unit/item
Finally, the product unit or item is the stock-keeping unit (SKU) of an individual device — for example, a MacBook Pro 13-inch with a touch bar in Silver color and 2TB storage. This SKU can be used to identify the exact model of Apple laptop the customer has purchased.
2) Ford Product Hierarchy Example
Product
At a basic level, customers need a reliable and safe form of transportation. Ford provides them with just that — cars, SUVs, trucks, vans, and commercial vehicles.
Product family
In terms of the product family, their range includes cars like the Mustang and Focus; SUVs like the Edge and Escape; trucks like the F-150 and Ranger; vans like the Transit; and commercial vehicles like the Super Duty.
Product class
Within each product, family are various product classes — such as cars, SUVs, trucks, vans, and commercial vehicles. The car class has subclasses such as hatchbacks, sedans, coupes, etc.
Product line
A product line is the complete range of cars within a product class. A product mix incorporates all the product lines that users prefer to use together or think of as similar products. For example, Ford’s car product line consists of Fiesta, Bronco, Endeavor, Focus, Fusion, Mustang, etc.
Product Type
Going further up from the product line to the product type — in the case of Ford cars — we have various types such as the Ford Fiesta ST, Ford Mustang GT, and so on.
Product unit/item
The final part of the hierarchy is the product unit or item — also known as the stock-keeping unit (SKU). For example, a Ford Mustang GT in red with a 5.0L V8 engine would be classified as a product.
Why is a Hierarchy Important?
The way a business organizes its products (product hierarchy) is crucial because it can aid in managing inventory and enhancing the customer experience.
Improving the organization of the purchasing experience can help customers easily find products based on their features and price, and also allow for easy comparison with competing products. Creating a hierarchy can also aid a company in conducting internal audits to ensure that each product meets the appropriate criteria.
6 Product Hierarchy Levels
To define product hierarchy more effectively, you need to understand these product hierarchy levels –
1. Need
The term “product need” refers to the main reason for a product’s existence. It is the first category used for organizing products and usually includes various types or classes of products.
For instance, products related to home improvement have needs like temperature regulation, insulation, ventilation, and more. Even though there are numerous options available for these products, they are grouped based on their common purpose. This makes it easier for customers to recognize and organize them.
2. Family
A “family of products” usually refers to a group of products that meet the same basic customer needs. These products may have different variations but still fulfill the same core needs.
For example, a customer may need a refrigerator to store food and drinks. There are many types of refrigerators available, like top-freezer models, side-by-side models, and French door models. All these products have the same need for temperature regulation but different features like size, style, color, and energy efficiency.
3. Class
A product class refers to a specific category of services offered by a company. A vehicle manufacturer produces personal vehicles for travel, categorizing them by different classes such as SUVs, sedans, and luxury vehicles. The Product class assists customers in selecting among various specifications.
While any vehicle can facilitate travel, certain safety or mechanical features that may be required are only available in specific vehicle classes.
4. Line
A product line refers to products that share similar features or prices. These products belong to the same category and provide customers with a variety of options to choose from.
For example, a car manufacturer offers different vehicle lines such as ‘Compact Cars’ and ‘SUVs’ within the same product class.
5. Type
A product type is a particular product that is part of a product line. This helps differentiate similar items and enables customers to make more precise selections.
For example, a car manufacturer offers different types of SUVs, such as small crossover vehicles, mid-size SUVs, and full-size SUVs. All these vehicles belong to the same product line and have different features like size, mileage, engine power, etc.
6. Unit
A unit is a stand-alone product. Businesses often use the term stock-keeping unit (SKU) to refer to it.
Individual units are the specific items that belong to a product type and are what customers take home after making a purchase. Each SKU within a product type has the same features and price as the other SKUs in that same product type.
For example, a car manufacturer offers an SUV type with multiple SKUs that have different colors and trim levels. The customer can purchase the specific car they want based on these individual units.
How To Make a Product Hierarchy?
Step 1: Drill Down to the Core and know your roots
It can be challenging to determine the essential product requirement. To simplify step 1, you can try starting with your company’s mission statement.
For example, if the mission statement is to provide customers with affordable and reliable services. Then, you need to identify what products are needed to fulfill that mission statement.
Step 2: Choose Your Key Categories or Features
If your company has many products, you should create categories to organize them. If your company only has one product, focus on showcasing its important features. Remember to keep your hierarchy simple, as there is no one correct structure. The product categories should ideally align with how the customer perceives the product.
Step 3: Optimize for the New Hierarchy
After agreeing on the core product and key features, you can optimize it. Here you need to pay attention to the following two aspects –
1. Optimizing Product Titles
Your new hierarchy allows you to establish a naming convention for products that are based on the tiers. This will make it simpler for customers and staff to search for products by creating standardized product titles.
2. Optimizing Category Pages
The different categories in a product tree provide a chance to create specific content for each page. Depending on your business, the pages’ format and length may vary, but they can all be optimized for SEO purposes.
Step 4: Scale Your Product Hierarchy
As your business expands, your organizational hierarchy will also develop.
When considering a new product line or feature, assess whether it aligns with your business hierarchy. If it doesn’t, it may not be suitable for your business.
It is acceptable to add more categories to the hierarchy if they align with the mission. The hierarchy does not have to be completely rigid.
Why Does a Product Hierarchy Matter?
1) A better user experience for customers
Product hierarchies are used to categorize items and services based on their features, costs, departments, or units. This makes it easier for customers to locate the specific items they are searching for.
2) Scalable organization for the company
Organizing products and services into hierarchies can make it easier for the company to scale as it grows and adds more offerings.
3) Improved search engine optimization for e-commerce platforms
Using a hierarchy to organize products can improve the optimization of e-commerce site pages for search engines. This can lead to increased site traffic and sales because pages are more likely to appear at the top of search results for relevant keywords.
4) Greater internal organization for the company and its products
A hierarchy is a useful tool for a company to organize its products into sections, and to identify key features that differentiate one product or service from another. When a company is well-organized, it may not need as many audits or reorganizations, which can save both time and money.
5) Improved website architecture, organization, and traffic
A clear hierarchy on a website improves its professional appearance and makes it easier for customers to find desired products, resulting in increased web traffic and sales, thus boosting the company’s revenue.
6) Enhanced marketing campaigns and customer recognition
Product hierarchies can improve product recognition and enhance product marketing efforts for the company. When products are sorted into categories and subcategories, customers can easily learn about them and are more likely to remember them when they need them.
7) Increased competitive advantage in individual markets
Using product hierarchies can give a company an advantage over competitors by emphasizing important features, pricing, and benefits. This can influence customers when they are making decisions about purchasing products.
Conclusion!
A product hierarchy is a crucial tool to measure success and identifying core benefits. It can speed up internal search since you can quickly locate where a product exists with its information and its resources.
By using a well-designed product hierarchy, you can enhance your business by ensuring that your basic product aligns with customer needs.
Looking to enhance your product hierarchy for better business outcomes?
Tip 1: Align your product hierarchy with customer shopping behavior. Organize your products in a way that makes sense to your target audience, considering how they search for and categorize products. This enhances the customer experience and can lead to increased sales and loyalty.
Tip 2: Regularly review and update your product hierarchy. As market trends and consumer preferences evolve, it’s essential to adjust your product organization accordingly. Regular audits ensure that your product hierarchy remains relevant and effective in meeting both business objectives and customer needs.
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I believe that this article is not correct
As it reffers to Product portfolio, where as product hierarchy is the division of product into its fundamental components