Normally this would be done from Word. You can easily access your Outlook
Contact data from Word. You can even create and save a merge document for
reuse if you want to.
Outlook is not a word processor.

Just to clarify, once you've set up a merge document, you can then start
your merge from Outlook. But your document creation will always occur in
Word. You can then use Outlook's Journal function to keep track of the
documents you create for your Contacts.