Categories allow you to easily sort your mail, marking messages from specific addresses or with certain subjects with a label and color.
These labels translate to programs that can support categories, such as Outlook. Labels can be added manually to a message or through inbox rules for new incoming messages.
Outlook on the web
Right-click on your message in Outlook on the web.
Select Categorize
Select New Category or one of the pre-existing categories.
Give the new category a Name and choose its Color to label the message, then click Save.
You can also choose Manage your Categories to add or delete categories.
Once you are done managing your categories, press OK to continue.
Outlook for MacOS
Select the message you want to categorize.
Then, in the menu bar, select Message. Scroll down and select Categorize. You can also choose Manage your Categories to add or delete categories.
Outlook for Windows
On Outlook for Windows Home tab navigate to the Tags section of the Home bar and select Categorize.
In the pop-up box, scroll to the bottom of the category list and select All Categories.
Color Categories window will appear. Click New button on the right of the window to create your new category.
In the Add New Category box, add a name for your category in the Name field.
Choose a custom color from the Color drop-down menu.
Add a shortcut key for your Category using the Shortcut Key drop-down if you want to use one. Leave that menu with the default value of (None) if you do not want to use a shortcut.
Click OK to close the Add New Category box.
Click OK again in the Color Categories box to save your new category.
For more information, visiting Microsoft's Help site: Create and assign color categories