Product Hierarchy

What is a product hierarchy?

At its core, a product hierarchy is a way of organizing products in a structured, logical system based on their relationships and roles within the overall business strategy. It’s a framework that groups products by categories or types, providing a clear and intuitive structure that’s easy to navigate.

This organizational structure is especially valuable for Product Managers handling a diverse portfolio of products or services. It helps make sense of how each product fits into the bigger picture, whether it’s part of a larger product line, serves a particular customer need, or contributes to the company’s strategic goals.

Having a product hierarchy in place is more than just a neat arrangement; it’s a tool that helps with decision-making, product prioritization, and ensuring all products are aligned with the company’s objectives. It ensures clarity across the Product Team and provides a framework for understanding how each product interacts with others in the portfolio.

Product hierarchy vs product architecture? 

While both product hierarchy and product architecture deal with the structure of products, they serve very different purposes and offer distinct perspectives.

Product hierarchy focuses on how products are organized within a business or portfolio. It’s about categorizing products based on their relationships, roles, and tiers in a broader organizational context. The product hierarchy is concerned with how products fit together, helping teams manage everything from product lines to individual offerings.

On the other hand, product architecture is more about the internal design and construction of a product. 

It’s the blueprint that outlines how a product is built, including its components, subsystems, and how they interact. Product architecture looks at things like hardware, software, or service integration and how different parts of a product work together to create the overall functionality. It’s about the structure of a single product itself, not the relationship between different products.

In short, product hierarchy organizes products at a portfolio level, while product architecture focuses on the internal design and technical structure of an individual product.

Learn more about product architecture: 

What are the different levels of a product hierarchy? 

A product hierarchy typically consists of six distinct levels that organize products based on their relationships and roles within the company’s broader portfolio. These levels help Product Managers and teams make sense of how products fit together, facilitating better decision-making and organization.

🚨Warning: Before diving into these six levels, there’s something similar – but importantly different—that we need to address. The three levels of product.

Alongside the six levels of a product hierarchy, you may come across the concept of the Three Levels of Product. We need to clarify that these concepts serve different purposes. 

The Three Levels of Product is a Product Marketing framework designed to help you understand your product from a customer benefit perspective, focusing on its value proposition.

In contrast, the product hierarchy is all about internal, organizational structure.

Now for the six levels of product hierarchy: 

1. Need 

At the top of the product hierarchy is the Need. This level refers to the underlying problem or desire that a product is trying to address, which reflects what the customer is trying to accomplish. It’s the reason a product exists in the first place. This level doesn’t focus on the specifics of the product itself but rather on the why behind it.

2. Family 

Next, we have the Family level. This is where we group products that satisfy the same broad customer need or serve a similar purpose. Products in the same family share a common goal but may vary in features, platforms, or how they deliver value.

3. Class

The Class level is a bit more specific, breaking down products within a Family into more defined categories. Think of it as narrowing the focus. For instance, within the Family of time management products, you might have a Class for digital apps versus physical planners. These classifications help refine the types of products that exist under the broad umbrella of a single need.

4. Line

At the Line level, we’re looking at a more granular segmentation, where products within a Class are grouped based on shared features or intended user base. A Line represents a specific variation or version of a product that serves particular customer preferences or price points. For example, in a family of Product Management apps, a Line could consist of basic vs. premium versions of the same software.

5. Type

The Type level goes even deeper into distinguishing products based on their specific features or how they’re used. Within a Line, there may be different Types of products, like varying color schemes, sizes, or specialized functionalities.

6. Unit

Finally, at the Unit level, we have individual products that are sold or distributed. These are the specific items that customers interact with and purchase. A Unit could be a single subscription to a software service, a physical item like a paper planner, or any product offered as a standalone piece.

Product hierarchy example 

The product hierarchy was first developed for manufacturing, so to help you understand it better, let’s return to those roots and give you an example of each level from the point of view of Toyota – the creators of the Lean methodology and some pretty reliable cars, too. 

💠 Product Need: To travel

At the most zoomed-out level, we have the fundamental need – the need to travel. This is the core reason behind all of Toyota’s products: people need a way to get from one place to another.

💠 Product Family: Vehicles

 The Family level groups all products that serve the same core need. In this case, Toyota’s Family is Vehicles – all the different types of products that help fulfill the need to travel.

💠 Product Class: Cars (or buses)

 Now, we’re getting more specific. At the Class level, we categorize the products within the Vehicle family. This could include cars, buses, trucks, or even motorcycles. Here, we’re focusing on Cars as a category within the vehicle family.

💠 Product Line: Toyota Yaris

The Line level refines things further. In the Toyota lineup, the Yaris represents a particular series of cars within the Car class. It’s a specific model that’s part of Toyota’s broader car offering, designed for a certain market or customer base.

💠 Product Type: Toyota Yaris GR Sport

The Type level is where you break down variations of a product within a Line. Here, we’re looking at the Toyota Yaris GR Sport, a more specialized version of the Yaris with sportier features aimed at a different customer segment.

💠 Product Unit: A red, LHD Toyota Yaris GR Sport

Finally, the Unit level represents the individual product that’s ready for sale. In this case, it’s a specific Unit of the Toyota Yaris GR Sport, let’s say, a red, left-hand drive (LHD) version of the car. This is the actual product that a customer would buy.

That should give you a clear understanding of the product hierarchy.

Why is product hierarchy important? 

A well-structured product hierarchy isn’t just a nice-to-have. Whether you’re building software, managing inventory, or refining your marketing strategy, a strong hierarchy ensures everything stays organized, scalable, and easy to navigate. Here’s why it matters:

A better user experience

Your product hierarchy influences how users interact with your product. If certain features naturally belong under others, your UX and UI should reflect that with intuitive navigation and visual cues. A well-structured hierarchy helps users find what they need faster, improving engagement and retention.

Smarter inventory & portfolio management

Not every new feature, product, or variation is a good fit. A clear hierarchy helps you assess whether a new idea aligns with your overall product strategy or if it’s just a distraction. It also simplifies inventory management by grouping related products, making it easier to track, maintain, and scale offerings.

Scalability as your business grows

A product hierarchy isn’t just about what you have now – it’s about what comes next. As your business expands, adding new features or products becomes easier when you have a structured system in place. Without it, you risk creating a tangled mess of offerings that confuse both customers and internal teams.

More effective marketing & positioning

A well-defined hierarchy helps you craft better marketing messages. You’ll know exactly where each product or feature fits in your strategy, making it easier to communicate its value. It also reinforces brand recognition – customers will start to associate your products with specific categories, making recall and loyalty stronger.

A competitive edge in your market

When your products are clearly structured, you can highlight the right features, benefits, and pricing points that set you apart from competitors. A strong hierarchy helps you position your products strategically, ensuring you target the right customers with the right message at the right time.

How to implement a product hierarchy 

Building a product hierarchy isn’t just about putting products into neat little boxes. You need to create a logical structure that makes sense for both your team and your customers. Here’s how to do it right:

1. Analyze your product portfolio

Start by taking a good look at your products. What defines them? What key attributes make them different or similar? Think about factors like function, audience, pricing, and any other relevant details. The goal is to identify natural groupings that will inform your hierarchy.

2. Define clear categories & subcategories

Once you’ve identified the key attributes, organize your products into a structured hierarchy. Your categories should be mutually exclusive (no overlap) and collectively exhaustive (cover everything). In other words, every product should have a home, and no product should belong in two places at once.

3. Assign products to the right levels

Now it’s time to put products where they belong. Every product should fit neatly into a category and subcategory based on the structure you’ve created. If something doesn’t fit, you may need to tweak your framework.

4. Review, refine, and adapt

A product hierarchy isn’t a one-and-done deal. As your business grows, your hierarchy will need to evolve. Regularly review and refine it to keep things relevant, especially if you’re adding new products or shifting strategies.

Product hierarchy challenges & how to overcome them

Building a product hierarchy sounds great in theory, but in practice, you might run into some roadblocks. Here’s how to handle them:

🚧 Resistance to change: Stakeholders might push back if they’re used to a different structure. Get buy-in early by clearly communicating the benefits and involving key team members in the process.

🔍 Complex products that don’t fit neatly: Not every product fits cleanly into one category. When this happens, revisit your structure. Do you need new subcategories, or does the product need repositioning?

⚙️ Managing the hierarchy at scale: As your business grows, manually maintaining a hierarchy can become a nightmare. Consider using Product Management tools (yes, like ProdPad!) to keep things structured and scalable. 

On that last point, let’s quickly show you how:

How to manage product hierarchy in ProdPad 

In Prodpad, you can manage your product lines and build a comprehensive product hierarchy to help you manage multiple products within your product portfolio. To do this, just navigate to your product portfolio tab, which can be found in the Roadmap area. 

Once here, you’re able to review your entire suite of products and add any new product lines to your roadmap or add new products under your existing product lines. 

You can also easily drag and drop each product into an order that suits you and fully reflects the product hierarchy of your business. If you’re working on one product more than others, you can also favorite the product line or single product for faster access.

You can get a better sense of how this all works in the ProdPad sandbox, a free and interactive version of ProdPad where you can tinker, learn, and really see the value of ProdPad right before your eyes.

Head on over and see how easy it is to organize your product hierarchy, and while you’re there, why not try out our templates to fully engage with Now-Next-Later – the best product roadmap format.