What’s a product hierarchy? How many levels are there in a product hierarchy? And why does it matter?
These are a few questions that burn their way into a founder’s mind. Especially when they’re trying to think of their product and its scalability.
A founder’s vision is where every product begins. And although this frequently gets lost in translation, it is true. It’s safe to say that this is the core principle of entrepreneurship.
Someone sees a problem or opportunity and creates a vision for how to solve the problem.
These solutions take the form of
Packaged tools, or
And while people talk plenty about how to scale a founder’s vision through the company org chart, there is less buzz on how to scale that vision through product hierarchy.
Wait what is Product Hierarchy, again?
Imagine you’re Amazon. Yes, the giant conglomerate that has us hooked to gratifying the speed shopping culture. And this month, you’ve got a new product— the latest smartwatch from Noise— to list on your website.
Now, where do you put it? There are thousands of categories on your websites. And probably only one of them will fit this new listing.
It would probably look like this:
Home > Wearable Smart Devices > Noise Smartwatches > *The latest smartwatch name*
In a similar way, business modules and features of your startup products can also be grouped systematically into categories.
For example, let’s take another look at IKEA’s product hierarchy:
Essentially, product hierarchy is a method for businesses to categorize their inventory. Regardless of retail products or the new age of digital products, it’s a strategy that works for all. This makes the record-keeping experience much easier.
Many successful businesses use product hierarchy so that they can organize their many products or single core product or services.
And this product hierarchy can assist both the customer and the company in better understanding the structure of its products. This eventually helps in comprehending the services and how to organize them.
Importance of Product Hierarchy
Walmart, Costco, and The Home Depot are some product hierarchy examples. These companies have a large number of employees, numerous product lines, and millions of items.
With so many moving parts, you’d think it’s a bit of an organizational dumpster fire. That is not the case. Credit goes to their well-thought-out product hierarchy.
But that’s not all. If done correctly, such a product hierarchy can help you with improving user experience, SEO, and internal search. Inventory management, customer satisfaction, and other issues are all improved by product hierarchy:
A more organized purchasing experience can assist a customer in quickly locating the products. It also helps in comparing competing products based on features and price.
A product hierarchy also helps a company’s internal audits. This is achieved by ensuring that each product exists within appropriate parameters.
Your product hierarchy enables representatives from all departments to confidently and consistently explain what your product does, who it serves, and the ultimate value(s) delivered to the customer.
The dangers of a poorly organized product extend far beyond digital boundaries and could have a negative impact on every aspect of your business.
Without a common language, you risk misrepresenting product value, confusing potential buyers, or chasing after features that aren’t necessary.
Scaling with Product Hierarchy
Establishing Your Root
It is critical to base your product hierarchy on user needs as well as business value. This common root promotes methodical product growth as you add new product lines, services, and features.
If a new idea does not benefit the “root system” you’ve established, it will most likely not fit naturally into your product hierarchy.
Prioritizing “good” features over “great” ones can be difficult because the latter does not fit the construct, but it will keep you from creating a “Frankenstein product” of disjointed functionality.
It is critical to base your product hierarchy on user needs as well as business value.
Because product management has a direct line to user needs, collaborate with them to determine the appropriate root for your hierarchy. In the broadest sense, what problem are you solving for the user?
For instance, Dropbox’s entire product is based on team collaboration, and everything they do serves that purpose.
Organizing Your Features
Creating a product hierarchy is similar to organizing your closet, pantry, or garage, and it can be as simple or as complex, as you require.
Keep in mind, however, that even large corporations can convey complex product ecosystems succinctly, so don’t be afraid to simplify if that’s the natural result. It’s most likely correct.
Begin by identifying shared features and functionality and categorizing them based on the pain(s) they alleviate. Consider Facebook’s Messenger and Video Chat products, which both fall under the communication umbrella. Suggested Connections and News Feed are both discovery-focused features.
Functionality buckets should be logical groupings that correspond to how the end product is ultimately presented and sold to the customer. This not only helps internal sales talk about your product; it also helps customers talk about it.
Growing Your Hierarchy
The sooner you design your product hierarchy, the better off you will be in the long run. Features become less difficult to vet and prioritize, packaging options emerge, and road-mapping exercises become less difficult.
Each time you expand your product, revisit your product hierarchy to ensure new additions fit. If they do not, that feature or product may be worth pursuing again, or you may want to consider creating a new category.
A word of caution: New categories should only be created if they are aligned with a growth roadmap for that category. Don’t just make a new category to accommodate something that doesn’t fit anywhere else.
When you add new features or products, ask yourself the following questions:
Does this feature/product fit naturally into an existing category in my hierarchy?
Is it rooted in user needs and business goals?
Will adding it affect my product positioning?
Will adding it change the way we sell?
Never be satisfied with how your vision is being realized through the product. Even if you have consistency, internal alignment, customer clarity, and a compelling vision tying everything together, everything can change tomorrow.
A new competitor, an acquisition or merger opportunity, or a market pivot can all create havoc in an instant.
And that’s fine. Building a solid foundation that begins with the vision and cascades down through your product line will provide you with the principles and rules that will govern how you respond to these changes.
Product scaling never stops, but the vision can remain largely unchanged. You will be able to scale your product effectively for years if your product, messaging, and internal processes align with that vision.