Understanding the Product hierarchy and Product classification

One of the things which confuses many beginners in Marketing is the product hierarchy. There are just too many types of product classes like Product line, product mix, product type etc. However, this article tries to make it all simple.

To understand the product hierarchy, we will have to look not at a single product but the business as a whole. So in this example, we can take Volkswagen as a company and we will try to understand the Product hierarchy of Volkswagen. 

1) Product need – Product need is the basic reason because of which the product exists. So the need for cars to exist is because people want to travel. This is the basic product need which is fulfilled by Volkswagen cars.

2) Product family – The Product family defines the core need which the product satisfies. When we are talking of the product family, we have to look at the complete business market and not at the individual market. So when travel is the basic requirement, then there is an option of Plane travel, train travel, roadways travel, travel via passenger cars or transport vehicles. In this case, the Product family is passenger travel and the product family of Volkswagen is Cars.

3) Product  class – Product class and Product family are very similar in nature and can also be treated as synonyms. For example – Volkswagen also manufactures bus which is a multi passenger transport vehicles and it also manufactures 2 seater luxury cars. Thus when we categorize different products within the company (and not outside the company like in Product family) then it is known as product class. Mercedes, for example, exists in cars and buses both predominantly. Thus, it has 2 common product classes where it is present.

4) Product line – The complete line of products within one class of products is known as the product line. So if we talk about Volkswagen passenger cars, then we have the Volkswagen Polo and the Vento as well as different products within the Volkswagen product line. At the same time, Audi is another brand owned by Volkswagen and is divided into multiple product lines including the Q series. So Q series is just one Product line and there would be multiple such product lines of Audi. You can read more about product line and product mix by clicking the link.

5) Product type – Within the Product line there are various product types. For example – If we talk of Hyundai’s I20, then there is I20 Asta, I20 Magna as well as I20 Sportz. So I20 becomes a product type and the other models become product units (explained below)

Similarly, for any given series, within the series there are multiple models and these are the product types. Audi’s Q6 or Q7 will also have various customized types on offer and these are known as product types. They are offered to customers based on the budget of customers and their requirement of features.

6) Product unit – The final aspect in the Product hierarchy is the product unit which is also known as the SKU. Continuing the above example, the Hyundai I20 Asta is one Product unit and so is the Hyundai I20 Magna. So if the product is an independent product and there is no other product type dependent on it, then it is an individual product unit.

Whether you take HUL, P&G or any such companies having multiple products and strategic business units, you can divide the products based on the above product hierarchy.