Nelson through his classification removed the shortcomings of the earlier classifications by using a stated procedure that could be objectively checked by other workers. His paper ‘A Service Classification of American Cities’ was published in the journal Geography in 1955.
He decided to base his method of classification entirely upon major industry groups as listed in the 1950 Census of Population for standard metropolitan areas, urbanized areas and urban places of 10,000 or more population. He omitted the little significance groups like agriculture and construction, and finally, arrived at the nine activity groups (manufacturing; retail; professional services; wholesale; personal service; public administration; transport and communication; finance, insurance, real estate and mining).
The problem of city specialization, and also the degree of specialization above the
average was solved by giving margins of different degree to different size classes. He did find a definite tendency for the percentages employed in some activities vary with city size. The question – ‘When is a city specialized?’ was solved by using a statistical technique – the Standard Deviation (SD).

He reasoned that that SD was the simplest and most widely understood of all statistical measures of variation, and that the degree of variation could be compared by use of SD even if, in some cases, we are dealing with large numbers , as in the manufacturing, and in others with small numbers, as in mining as wholesale trade.

A city can be specialized in more than one activity and to varying degrees. Thus he showed for each city all activities that qualified for plus 1, plus 2, or plus 3 SDs above the
mean. According to Nelson’s Classification, a city can be specialized in more than one activity and to varying degrees.

Suppose, any city which is classified as Pf 2F, it means that it has 22.87 or more but
less than 28.76 per cent of its labour-force employed in professional service and 4.44 or more but less than 5.69 per cent employed in finance, insurance and real estate. In short, his table indicates, the number of SDs shows the degree to which the urban centre stands out for the activity in question. A city which does not fall even under 1 SD, average in any activity appears as diversified D, in Nelson’s classification.