Product Categorization: A Guide to Organizing your Products


In this Article

When you step into a store, what’s the first thing you do? If it’s the usual grocery or department store, your feet might lead you naturally where you need to go. You know where to find a specific product by its categories and related items. If you don’t know, signs will prompt you to the right place. That same intuition for how products are organized occurs appears when online shopping. In eCommerce, product categories are displayed in a navigation system at the header of a website store. Needless to point out, product categorization in an online store is influential in how customers find what they need – and the foundation of which is product categorization.

In a nutshell, product categorization (or product hierarchy) is the basis for how shoppers navigate and discover products. Setting it up creates a structure that relates products by their attributes. For a business, it provides all departments efficiency when searching for and obtaining product information.

Moreover, it’s the first step to making that information usable across multiple systems and platforms. For customer experience, hierarchy is the intricate layout of intuitive, searchable navigation.

Organizing your products and their associated information is the framework of a great online store. But how do you start with establishing or (even improving the one you already have) product hierarchy and maintaining it? In this guide, we go over the basics of product categorization for a successful eCommerce enterprise.

What is product categorization?

To be exact, product categorization or hierarchy is the management of products in any system that ties them by their relevance. Just like a biological taxonomy, product hierarchy collapses broad categories into smaller, more precise categories. In each category, products with similar tags or attributes are grouped logically. Many platforms refer to such relationships as parent-child relationships.

For example, if you go to the grocery store, you will logically find milk in the dairy aisle. On an online store, say a large department enterprise of consumer goods like Walmart or Target, to find a lamp for your workspace, you’d look for furniture, then find the category most specific to your needs – like Office Furniture, then Accessories. It’s self-explanatory because it should be.

Product hierarchy must be intuitive, otherwise finding products will prove difficult for shoppers. However, as intuitive as it can look on the outside, setting it up comes with some challenges. Regardless, creating and maintaining an optimal product hierarchy is important for a business.

Is there a difference between product hierarchy and taxonomy?

For the most part, product hierarchy, and taxonomy are used interchangeably.

Think of product hierarchy as the system, in which taxonomy is the method of ordering or grouping products. Product hierarchy forms the “data model” behind the categorizations – it automatically nests products underneath their groups based on level. Taxonomy is how those groups are determined, and how those products are logically classified. What attributes put products in a certain class? Product hierarchy denotes a ranking of products – first by brand, then under each brand, the product class, then.

definition of product categorization

Why is product categorization important?

Imagine trying to shop online with all products splayed out across a b2b eCommerce website, with thousands of pages to sift through. Or perhaps it’s a website that relies on tagging or relevant keywords only to find a product – resulting in hundreds of different tags linked. It would be horribly difficult to actually shop.

None of these methods are actually used of course – no one would dare consider such a disastrous strategy (or lack thereof). But that could be the potential alternative without product hierarchy.

Product categorization is critical for business success for the following reasons.

1. Intuitive Shopping Experience

Product categorization is important because it streamlines the shopping experience. It ensures visitors to an online store can easily maneuver through the catalog offerings. Preventing empty or abandoned shopping carts is one of the many roles the product hierarchy provides. While it isn’t necessarily navigation, it does provide the foundational basis for creating an optimal navigation menu.

Overall, an online eCommerce store with all the elements of a well-designed product categorization contributes to a positive experience. By stepping into the shoes of the shopper, you can best create a system that makes their shopping more efficient. When directed to consumers, it’s vital that the product hierarchy streamlines browsing to get in impulse buys and make relevant products visible.

As for B2B enterprises, it’s even more important to comprehensively lay out a detailed hierarchy. To fully present an expansive catalog, other businesses can better hone in on their specific needs. After all, they won’t waste time languidly shopping around – they already have product requirements based on their goals.

2. Product Findability

Establishing an excellent categorization system cuts straight to the chase. It caters to busy shoppers with little time or attention to spare looking for a product they could more easily find elsewhere. It creates a map for shoppers online. Just like the signs on the ceiling in a grocery or department store, shoppers know intuitively where to go to find the same products.

Thus, product hierarchy leads to more sales and success. It makes it easy both for people searching on search engines and for people browsing on the store website to find what they need.

Product hierarchy reveals itself in the header menu or main navigation. If someone is searching for particular types of products on Google, your well-organized and tagged products can appear on the search results, displaying “related products.” your own website’s search bar benefits as well. Product hierarchy creates levels of relevant products to showcase when a shopper inputs a keyword. As a result, all tagged products show up in the hierarchy that best relates to the query.

3. Increased Sales

With all factors considered, product hierarchy naturally leads to more sales. When customers can navigate and find what they need faster, it’s like you won’t miss out on potential conversions. Certainly, without a bad product categorization system – one that leaves products lost or hidden and that isn’t intuitive – you’ll avoid losing sales.

Failing to direct customers to their desired item hinders all efforts in your business. Even if you force customers to rely on the search bar, it’s important to note that product hierarchy also drives the search function on your website.

4. Operational Efficiency

Product hierarchy isn’t just important for shoppers. In the operational backend processes, departments need a strong product categorization system. To maintain product information and embark on projects effectively, all parts of your business also needed swift access to all products.

Therefore. product hierarchy stimulates productivity. The logical setup of categories and subcategories lets all departments find the products and subsequent data they need. Overall, this improves the workflow and timeline of projects.

Furthermore, product hierarchy reduces inconsistency or product information duplicates, since parent-child categories logically create an environment where it’s rare to find a product in two different categories. Such categories are one-dimensional, allowing for more accurate usage of product information for content and collateral.

5. Search Engine Optimization

Because product categorization impacts the structure of your online store site, it has a significant impact on SEO. All product pages, category pages, and the holistic navigation system are indexed. Together, they add more entry points from which traffic can come to your online. Product attributes and other information, when well-optimized, strengthen your on-page and off-page SEO.

Steps to Perfecting Product Categorization

Creating a good hierarchy really requires a strategy. The fewer product lines and complexities you have, the easier and simpler constructing your hierarchy will be. It starts with “creating” a “taxonomy or organizational structure of information, which is the framework for which all subsequent data will be organized from here on out. Regular updating of the taxonomy is needed.

Step 1: Identify data sources

What comes first is pretty evident: figuring out where you currently have all your product information stored. When your product data is maintained in different locations and haphazardly managed, it’s important to start by figuring out where they are. This is the first step to data governance, a principle that you can automatically maintain on systems like PIM software.

Derive product information from all catalogs, spreadsheets, product or data feeds, files, and so on. Check with all departments for any siloed data, as well as suppliers or distributors for updated product information. Then, prepare all data sources to send that information to one centralized location. If you have an ERP system, this may be a simpler process.

Once you have identified all product data sources, you embody more governance over data. The data governance model is a way of taking back authority over your critical product information. Having effortless control over product data powers accuracy, quality, and standardized product information.

product categorization

Step 2: Gather all product data

When it’s time to round up all the product information into one place, this is where data governance starts. Centralization in a PIM interface, for example, creates an optimal environment for product information that is ready for product categorization.

It’s like when you organize your garage or house. To figure out how to organize your space, you first take out everything and lay it out in front of you. From there, you can denote which products you want to keep, or throw away, and how organize your space. The same goes for your products.

Why is centralization so important for product categorization?

Gathering and storing your product information in one place helps with the classification process. It gives you a holistic view of all product attributes so you can know where to begin. This is where it’s time to set up a taxonomic system that puts each product into designated boxes.

Automated systems like PIM solution allow businesses to create predefined tagging standards. As products are entered into the database, attributes are standardized and cleaned up. It’s then easier to view products by characteristics. You can better make intuitive connections between product categories and start to create your product hierarchy.

On product information management software, creating predefined rules vastly optimizes the process of product information uploading and updating. All new subsequent product launches are easily integrated with the rest of the product hierarchy.

During this step, you can view the state of your product attributes and establish formatting standards for your brand. Taking account of the information you already have is important to take stock of any issues you might have in your organization. Look at your inventory to see how complex or deep your product hierarchy might be. Check-in with your departments and team members to see where the gaps are in the backend.

product categorization

Step 3: Create logical product relationships

Once you have all your product information lined up, it’s time to create categories. At this point, it should be easy to visualize what buckets in which to place products. Many of the categories are self-explanatory based on product attributes.

When setting up your product categorization, the levels will determine taxonomic parent-child relationships.

The levels of product hierarchy

  • Need– This is the basic purpose of the product.
  • Family– This is the specific need of the specific type of product.
  • Class– Similar to family, in which we categorize different products within the company as a product class.
  • Line– Product line refers to a type of product within an organization. A company may have multiple product lines with a certain number of products per line.
  • Type– Within a product line or series, there are multiple types of customizations.
  • Unit– A single item of a product type.

If your brand has a narrow variety of products, categories are much simpler to create. If you offer a more diverse set of products, you’ll have to think about categories more strategically. Offering too many options can lead to an overcomplicated navigation menu.

What might be a little challenging is the labeling. Naming your categories must make sense to your target audience. Usually, it’s pretty easy to name categories, so long as you keep them simple. Category names should make sense and be plain, with terms that shoppers are most likely to search for. Being more creative might lead to complex or confusing product category names. Keep the fun names to category page taglines and banners.

Some basic tips for product categories:

  • Consider product keywords to best create clear product category titles.
  • Use big department store sites as inspiration (i.e. Amazon, Walmart).
  • Continually navigate your online store site to get a feel of your product hierarchy in action.

These simple considerations can help you best optimize your product categorization.

product categorization

Step 4: Optimize all naming conventions

Rather than stopping at your categories names, look to all your naming conventions. Categories, subcategories, category and product pages, product titles, descriptions, and down to every attribute.

General product attributes to include:

  • Brand
  • Category
  • Subcategories
  • Supplier information
  • Materials & sources
  • Warranty
  • Technical specifications
  • Design, color, weight, etc.

Ensure naming conventions are consistent. Do so by using the same standard tags for every product, better made simple on the best PIM software. Keep them short, but also decide in little details that may not seem so important. For example, deciding on capitalization (i.e. blue, BLUE, or Blue) or unit spelling (i.e. ounces, oz, or OZ.).

Category pages: improve the browsing experience of your website by creating web pages for each product category that match the quality of rich product pages. Show most popular products, relevant or related products, and products viable for cross-selling – these are all a part of the tagging system.


Step 5: Consider the psychology of a shopper

To set up your product hierarchy, put yourself in the head of your target audience. Understanding how a person would shop, especially based on context, is hugely important for setting up your product categories.

Just like merchandising requires a basic knowledge of psychology, so too do front-end product categories impact shopping behavior. Doing so can help you consider how best to display product categories online, as well as how many categories to showcase. Alongside the obvious benefits of organization, good product categorization also satisfies the subconscious mind.

Brands that migrate from a product-centric model to a customer-centric model totally rethink how they manage their product information. For example, when before stores would categorize products strictly by product function, something like a grill would be placed with the Outdoor products rather than the Cooking & Kitchen Supplies, just as example.

Taxonomic vs. Thematic Categorization

Brands have the choice of creating a product categorization based on purely taxonomic product relationships or thematic relationships. Choosing one will require an ongoing balance between brand objectives and customer objectives.

For example, in some cases, it may be easier for consumers to search for products based on their contextual attributes, like holiday-themed category pages.

However, for brands, it causes some operational inefficiency to maintain such products. For instance, Valentine’s candy would have to be separated from the rest of the products under the food category. Luckily, holiday and seasonal themes are temporary, but some yearlong inventory products aren’t so cut-and-dry in their category placement.

No matter what, ensuring a comprehensive navigation system alongside filters helps make shopping easier while maintaining brand values.

As for the user experience of your navigation, consider shoppers’ psychology as well. Product hierarchy sets up the stage for merchandising, which is all about the combination of design and psychology. The goal is to display categories and products in a way that best appeals to shoppers.

Step 6: Iterate and continually improve product categorization

When you first set up your organizational structure, it won’t be perfect. Only once you implement and wait for feedback can you improve its quality. While product hierarchy doesn’t necessarily translate directly to your navigation menu, it does impact it.

With analytics and information you receive from shopper behavior, you can inform your product hierarchy. Such insights lets you continually update your product hierarchy over time, and you can use A/B testing with multiple storefronts to compare results. When done right, you’ll see your conversions start to rack up.

product categorization

Step 7: Scale your product hierarchy

Alongside your business growth and journey, product hierarchy will inevitably need a refresher. In order to scale, say by adding new products or product lines, you will need to continually go back to your product categories. That’s why it’s necessary to set up a good hierarchy from the very beginning, one that takes into account your business goals.

When assessing as new products are added, check if there are ways you could improve categories or shift them. Scaling your business could create more complexity. To avoid overwhelming shoppers, it can be helpful to look for creative ways to reorganize or condense your product categorization. Many businesses find that they don’t tend to change their category structures too much, but it’s always crucial to consider how future updates will impact the hierarchy.

As a general rule, allow your product hierarchy to “guide” how you scale your products or inspire your future product lines. Just remember to stay consistent with your original conventions.

Product Categorization Don'ts

Setting up your product organization can take a lot of know-how. But it’s also important to avoid falling into a few common mishaps. Here’s what you should watch out for.

1. Duplications

Ensure that you don’t have redundant categories. Sometimes it can be hard to manually pinpoint until you dig into your products and ae-asses. Having similar categories will be clear if you find the same product could fit into more than one. Doublecheck for any duplicate categories or product information attributes, especially with a PIM. View your entire taxonomy structure and check relevant keywords for any repeats or errors.

2. Misidentification

Categorizing products the wrong way is easy to fall into, especially if you don’t have an automated system to manage product hierarchy. This usually comes about due to a manual, outdated system, since automating how you organize your product attributes will prevent making mistakes.

3. Forgetting or missing categories

If you haphazardly set up your product hierarchy, this step is a simple, but completely avoidable mistake. Check for this by seeing if any categories or subcategories seem to be overcrowded with products. Doing so will point you to potential ways to break down those categories.

4. Overcomplicating your product hierarchy

The definition of “overcomplication” can be subjective depending on what kind of business you are in. Some brands simply have thousands of SKU items to manage, with much variety. Smaller businesses might not struggle so much with this. In some cases, it’s possible to over-categorize when it isn’t necessary, with few products in each category. The general rule is that if your main product categories exceed 15, it may be a good idea to rethink the structure.

5. Neglecting SEO

Because product hierarchy impacts SEO, it’s important to consider it from the beginning stages of your setup.

Always check your keywords and research common search terms, letting them guide your categories. Don’t allow mistakes to go unnoticed, because a product in two different categories impacts SEO. After all, it counts as duplicate content. Taking wording into consideration, as well as a user-friendly navigation system is best to avoid bounce-offs.

product categorization

Final Words

Website design and user experience are nothing without the basic unit – how your products are managed. Optimization can draw visitors to your site organically, but actually finding what they require could take worth that might not be worth it. A seemingly well-organized front-facing navigation menu could look good.

However, if categories aren’t logically created, maintained, or duplicated, or if the wording is confusing, it can throw things off imperceptibly. Not to mention, poor product organization could prevent scaling in the future if it’s already hindering business efficiency. For teams to work their best, well-maintained product categories are critical across organizational systems.

Product hierarchy is best stored and preserved in one central location. One where all business systems and departments can access in a snap. A PIM which holds products and attributes is where businesses can establish their taxonomic structure. From there, it’s easier to propagate that structure across various platforms and channels. As the business grows, it’s a breeze to reassess and update the product hierarchy as needed, all from one place: the PIM.

If you want to learn more about how implementing PIM can help optimize your product organization and management of product data, schedule a demo of our PIM and DAM systems today or visit us at


Product categorization is the practice of organizing products into distinct categories based on shared characteristics. It improves the user experience by facilitating efficient browsing and helping customers find relevant products quickly. Effective categorization enables comparisons, aids inventory management, optimizes search functionality, and supports merchandising strategies.

Optimizing product categorization involves avoiding common pitfalls. Keep categories simple and intuitive, use clear naming conventions, align with user preferences, and regularly update the structure. Following these best practices enhances browsing, boosts customer satisfaction, and drives better engagement and conversions.

To achieve effective product categorization, follow these steps. First, analyze your products and identify commonalities. Then, create a logical category structure that aligns with your goals and customer needs. Use consistent naming conventions that are clear and descriptive. Prioritize the user experience by designing a seamless navigation flow. Finally, regularly review and update the category structure based on feedback, analytics, and changes in your product inventory to adapt to customer needs.

Effective product categorization brings various benefits to your business, including enhanced user experience, improved searchability, streamlined inventory management, and increased opportunities for cross-selling and upselling. It enables efficient navigation, leading to higher satisfaction and repeat visits. Proper categorization boosts search engine rankings and drives organic traffic. Streamlined inventory management allows for better control and insights. Clear categorization facilitates cross-selling and upselling strategies, encouraging additional purchases.

Effective product categorization is crucial for organizing and presenting your product inventory to customers. Find the right balance between simplicity and granularity, creating an intuitive and user-friendly categorization structure that accurately represents your products. Continuously review and optimize the categorization based on customer feedback and evolving business needs. By investing in effective product categorization, you can enhance the user experience, improve searchability, and drive higher conversions for your business.