9/18/19 (Updated April 2025)
Data management is an essential business practice, and keeping your contacts segmented is not only key to organizing your sales activities but also to understanding your business and clients. It’s essential that you keep track of what you’re selling and to whom you’re selling.
Many CRM users depend on categories and tags to assist them in segmenting their data. They are similar in that they allow a variety of ways through which your database can be organized. In most cases, people tend to be confused about when to use tags or categories.
Understanding the Fundamental Difference
Categories are frequently used to break your CRM database into more manageable groups or classifications, or to target or segment your contacts, and are meant for broad grouping of your database. Think of these as general topics or the table of contents for your database. Categories are there to help identify who you serve. It is to assist your company in providing the right marketing and service to your leads and clients.
Tags are meant to describe specific details about your leads, contacts & clients; to micro-categorize your database.
For example, categories for my clients can be something like CRM Implementation, CRM Customization, CRM Audit, to group my clients by which service they’ve used. Now when I add a client, I’ll attach them to one of the categories. Then I will add tags like HubSpot, Salesforce, or Zoho, etc. to specify which CRM software they use.
Both tools represent a perfect way to alter your data by arranging and rearranging it to suit your business. For example, they can be used to segment data using customer profile, by conversation type, by industry, among others that one prefers.
Best Practices for Categories
When implementing categories in your CRM, consider these best practices:
- Keep them broad but meaningful– Categories should represent major segments of your business that don’t change frequently
- Limit the number– Aim for 5-10 primary categories to avoid overwhelming your team
- Make them mutually exclusive– Each contact should ideally fit into one primary category
- Align with business objectives– Categories should reflect your core business areas or revenue streams
- Use consistent naming conventions– Create a standardized naming system that everyone understands
Effective Tagging Strategies
Unlike categories, tags offer more flexibility and can be used more abundantly:
- Be specific and descriptive– Tags should provide granular detail about contacts
- Create a tagging system– Develop prefix conventions (e.g., event: webinar2025, interest: automation)
- Regular tag maintenance– Review and clean up unused or redundant tags quarterly
- Tag for actionability– Each tag should serve a purpose for segmentation or follow-up
- Document your tag taxonomy– Create a shared reference guide for your team
Business Categories & Tags to Consider
CRM has numerous features that, if used well, can be beneficial to the business. However, tags have proved to be the most overlooked, yet it is a vital tool.
Customer Journey Stages
New Lead: Every business is looking to increase sales, consequently increasing its profit. This requires the acquisition of new leads and the nurturing of the same. One must pay attention to the leads’ requirements and behavior to increase the chances of converting them. Once the lead has been converted, the owner can decide to remove the tag.
Opportunity Stage Tags: Consider adding tags that indicate where prospects are in your sales pipeline:
- Discovery Call Completed
- Proposal Sent
- In Negotiation
- Ready for Close
Engagement Level Tags Track how engaged your contacts are:
- High Engagement
- Moderate Engagement
- Low Engagement
- Inactive (90+ days)
Business Intelligence Tags
Services Offered: Customizing your services can go a long way in helping your business. Such a tag can help the business focus on providing customized services depending on what the customer purchased.
Competition: Depending on the type of business, competition tags can help you strategize on how to gain market share or seize new opportunities. The information gained here can assist in planning future actions to be taken.
Referral Source: One should make a tag/category that shows them how the customers heard about the business. Understanding what attracts prospects to your business is critical in planning your future marketing budget and understanding which advertising channels should be used.
Communication Preference Tags
Today’s customers expect personalized communication. Consider tags like:
- Prefers Email
- Prefers Phone
- Prefers Text
- Do Not Call
- Weekly Newsletter
- Monthly Updates
Event and Interaction Tags
Track meaningful interactions to build stronger relationships:
- Met at [Event Name]
- Attended Webinar
- Downloaded Whitepaper
- Requested Demo
- Past Client (2023-2024)
Tips for Effective Category and Tag Implementation
- Start with a plan – Before implementing tags and categories, map out your business objectives and how these organizational tools will help achieve them
- Train your team thoroughly – Ensure everyone understands the difference between categories and tags and uses them consistently
- Perform regular audits – Review your tagging system quarterly to eliminate duplicate or unused tags
- Use automation when possible – Set up rules to automatically tag contacts based on actions they take (form submissions, email opens, etc.)
- Leverage for segmentation – Use your categories and tags to create highly targeted marketing campaigns and personalized follow-ups
- Monitor performance metrics – Track conversion rates by category and tag to understand which segments perform best
- Create tag groups – Organize related tags into groups (e.g., Interest, Source, Activity) to prevent tag sprawl
- Implement a governance process – Establish a protocol for adding new tags or categories to prevent duplication
Avoiding Common Pitfalls
- Tag explosion – Resist the urge to create too many tags, which can lead to confusion and inconsistent use
- Outdated information – Set up a schedule to review and update tags as contact information and statuses change
- Inconsistent application – Create clear guidelines for when and how to apply specific tags
- Duplicate categories – Regularly check for and merge similar or duplicate categories
- Forgetting to use them – Build tagging into your regular workflow and CRM processes
There is a common belief among marketers that slicing and dicing of data helps them deliver better results. Using categories and tags has made the process of segmenting easier. Categories & tags should be used to provide positive actions. Categories & tags should be built in line with the company’s operation.
Real-World Applications
Consider these practical applications of effective categorization and tagging:
- Email Marketing – Send highly targeted messages based on specific tag combinations
- Sales Prioritization – Help your team focus on the most promising leads based on category and engagement tags
- Customer Success – Identify at-risk clients through engagement tags and proactively address concerns
- Marketing ROI Analysis – Determine which lead sources provide the highest conversion rates and lifetime value
- Product Development – Understand customer needs by analyzing interest and pain point tags
We hope that this article helps clear any and all confusion when it comes to the topic of categories vs tags. We would love to hear your thoughts on this matter. How do you sort your content? What best practices do you follow?