Two of the most common ways customers find products on Amazon are by searching and browsing. Even the greatest products will remain in oblivion if they are not classified correctly or just not classified at all.
For example, in the DIY & Tools store, there are literally hundreds of thousands of products. Not classifying your products is the same as dumping your product in one big heap and then asking customers to find it in that heap.
Accurately classifying products is like placing your products in the correct aisle and on the correct shelf in the shop. And if your product shines on that shelf with great information, quality and pricing, and if your feedback is great, you have just won over a new customer.
Whether you are doing bulk product uploads (using either XML or text files) or listing them one by one using the Add a product feature, the key to accurately classifying products is to drill down as far as possible to the deepest classification term.
Consider the classification of power welders:
If you sell arc-welding equipment, you must choose the most accurate classification term that fits your product, such as "mig-welding-equipment", "spot-welding-equipment" or whatever describes it best. Do not leave the classification to "arc-welding-equipment".
You might think that if you leave the classification at the broader level, your products will show up no matter what. But the opposite occurs. If you classify your propane torches at the power-welder level, it will only be found when browsing power welders. It will not be found at any deeper level. You have misplaced your product and customers will never find it in the Tools store.
To learn how to classify your products, see Using the Product Classifier.