Categorizing people and/or stereotyping them can be of use both to individuals in their daily lives and to people who are trying to study society.
On the personal level, stereotyping allows us to understand our world without having to expend as much effort. When we categorize people (as long as those categories have any grounding in truth) we gain cues about how to treat them without having to go through the difficult process of actually getting to know them. For example, let us say that I do not trust salespeople. Stereotyping them in this way allows me to be on my guard when talking to them without having to try to determine whether to trust any particular salesperson. That way, I do not have to learn that a particular salesperson is untrustworthy “the hard way.”
On the level of social analysis, categorizing people is important as well. When sociologists want to study society, they cannot really do so without putting people into groups. If we study (for example) the impact of social programs on all individuals, it is harder for us to understand the world than if we categorize them as poor, middle class, and rich and then study them on the basis of those categories.
Of course, categorizing people can lead to very bad results. Whenever we categorize people in our personal lives we run the risk of discriminating against them or treating them badly when they (as individuals) do not deserve such treatment. When we categorize on the academic level, we run the risk that we will fixate on our categories and not realize that there are better ways to group people.
Categorizing people, then, has its good and bad points both for individuals and for academics.