In the context of preparing data for a machine learning model, you are working with a dataset that includes categorical variables such as 'Product Category' with values like 'Electronics', 'Clothing', and 'Home Appliances'. The dataset also contains numerical features. Your goal is to preprocess this data to ensure optimal performance of a linear regression model, considering constraints like computational efficiency and the interpretability of the model. Which of the following techniques should you employ to manage the categorical data effectively? Choose the best option.