In Outlook, click on your contacts "the people icon in the bottom left of your mailbox:



Now go to the top left of Outlook and select NEW CONTACT GROUP



Enter a name for your contact group as shown below:



Now click on the "ADD MEMBERS" button on your Outlook ribbon and select one of the below - you may have contacts in one or both:





You can also use the pulldown arrow next to the Address book to select different locations/address books:

Instructions from MS Website: