An excerpt from Rory Sutherland’s new book ‘ALCHEMY: The Dark Art and Curious Science of Creating Magic in Brands, Business and Life.’ Reprinted with permission from William Morrow.

A few years ago, a coffee shop opened on a fairly busy road a mile or so from my house. There were about twenty seats inside, and a few benches on the pavement outside. It wasn’t a bad coffee shop, but in time it failed. Some new people took over, following what seemed to be an identical formula, but they failed too.

The third owners to take over the premises therefore seemed overconfident in trying the same formula, yet they miraculously created a successful business. The food and the prices did not seem to be any different from that of their predecessors. In fact the only thing they changed seemed trivial: they bought more attractive chairs and tables, and placed them outside at the start of the day, as well as a waist-level gauze fence which surrounded the chairs, making a kind of terrace. This was less efficient than the old benches, since this moveable (and therefore thievable) furniture had to be stored away at the end of each day, and replaced every morning.

However, I think it was precisely this change that was the reason for the new shop’s success. I mentioned that the café was on a busy road–in fact, to anyone concentrating on their driving, its existence wouldn’t have been immediately obvious. Even if you did spot the sign saying ‘coffee’, it was far from clear, when no one was sitting outside, whether the coffee shop was open–you could have spent five minutes finding a parking space only to find it was closed.*

The old benches that permanently sat outside were meaningless as an indicator of whether the shop was open. By contrast, the new chairs and the fence, which might have been stolen or have blown away if left unattended, were a guarantee that the shop was open–no one who had closed their shop would have gone home and left them in the street.

‘Oh, come on,’ I hear you say. ‘This is all very well in theory, but nobody driving down an A-road consciously calculates the probability that a café is open by assessing the portability of the furniture outside.’ In one sense you are right, but they don’t do it consciously–they do it instinctively. And to make such calculations we use mental processes, which take place beyond the reach of conscious awareness. We draw unconscious inferences from environmental cues everywhere we go, without having the slightest awareness that we are doing so–it is thinking without thinking that we are thinking.

These mental processes are psychological rather than conventionally logical, and rely on a different set of rules to those we adopt when we use conscious reasoning, but they are not necessarily irrational, given the conditions under which our brains have evolved. Our brains did not evolve to make perfect decisions using mathematical precision–there wasn’t much call for this kind of thing on the African savannah. Instead we have developed the ability to arrive at pretty good, non-catastrophic decisions based on limited, non-numerical information, some of which may be deceptive. Far from being irrational, the inferences we are able to draw just from seeing chairs outside a café are surprisingly clever, once you uncover the reasoning behind them.

A sign that said ‘Open’ could be a meaningless claim, because someone could simply have forgotten to turn the sign to ‘Closed’–and in any case it would be hard to read from a car. A neon sign that said ‘Open’ would be a more reliable indicator, since someone leaving the shop would probably switch it off to save electricity.†

But light, stackable chairs behind a windbreak–now that’s a signal you can trust. In other words, the chairs act as an effective advertisement; the cost of their purchase and the daily effort entailed in arraying them outside the business and restacking them at the end of the day is a reliable signal of the existence of a functioning coffee shop, and one that is tacitly understood rather than consciously processed by human reason. Having worked in advertising for over 25 years, usually for large companies with big budgets, it still fascinates me how great an effect unconscious signaling can have on the fortunes of a tiny business. And more than that, it frightens me to think how many perfectly worthwhile businesses have failed that might not have done if they’d implemented a few trivial signals.‡

Relatively small businesses that might not be able to afford to advertise in any conventional sense, could transform their fortunes by paying a little attention to the workings of psychologic. The trick involves simply understanding the wider behavioral system within which they operate. Cafés could boost sales by improving their menu design. Many small shops are inadequately lit, and so passers-by assume they are close–how much business do they lose as a result? Pubs are often needlessly intimidating because their windows are made of frosted glass, preventing people from looking inside before entering. Pizza delivery could differentiate themselves in a crowded market by agreeing to deliver tea, coffee, milk and toilet paper alongside a pizza. Restaurants might increase sales by allowing the kerbside collection of takeaway meals–or by adding a sign which says ‘parking at rear’.§

In the unlikely event that either of the failing cafés had decided to appoint a management consultancy to solve their business woes, I doubt anyone would have suggested changing the furniture; doubtless they would have received a long list of recommendations covering all the left-brain facets of the business–pricing, stock control, staffing levels and so forth. Anything that could be included on a spreadsheet would be analyzed, quantified and optimized, in order to increase efficiency. But no one would have mentioned the chairs.¶

I will now take my idea one step further. Not only would we reliably infer from the presence of tables and chairs that the café is open, I also believe we go deeper still–I think we subliminally deduce that any place that goes to the trouble of erecting chairs on the street will serve coffee that, at the very least, is unlikely to be terrible. That seems a silly use of mental energy-surely the way to determine whether the coffee is good is to buy one and find out? ‘I knew the coffee was going to be good because of the chairs,’ sounds like a very silly sentence, but hold on a moment–maybe, using psycho-logic and a bit of social intelligence, we can identify a connection. For a start, someone who invests in new chairs and goes to the trouble of placing them on the pavement every day is not lazy, and has also invested in their business. Furthermore, they seem to expect their business to be a success–had they not, they would not have undertaken the expense. The chairs don’t promise perfection, but they are a reliable indicator of at least reasonable quality. The business owner who buys the windbreak and the chairs has probably also invested in a decent Gaggia machine, proper milk and coffee beans–and in training his staff. It suggests the owner, rather than playing the short game of immediate profit maximization, is playing the long game, building a reputation and a loyal customer base–, which will mean a cappuccino that is palatable at the very least.

Of course, you might have to be careful not to overdo this kind of signaling. Putting expensive armchairs outside might lead people–not unreasonably–to conclude that the establishment is also expensive. This question is a significant dilemma in supermarket design: the main factor which influences human price perception in shops is not, bizarrely, the actual prices charged, but the degree of opulence with which the store is fitted.

If this emphasis on advertising seems excessive and self-serving, I sympathise–in fact, I thought this myself. However, it all depends how you define advertising; in nature, it is often necessary for something to present a persuasive message, and in a way that can’t be faked. Information is free, but sincerity is not, and it isn’t only humans who attach significance to messages in proportion to the costliness of their creation and transmission; bees also do it.**

*    Anyone familiar with provincial British tea and coffee shops will know that they follow the most eccentric opening hours in the known universe.
†    Though a neon sign would be better suited to an American diner than a British coffee shop.
‡ I know of one branch of John Lewis that could double their sales simply by placing a sign at the entrance to their car park.
§    My use of one local restaurant doubled when I discovered an obscure public car park hidden behind it.
¶    I have never worked for McKinsey, Bain or the Boston Consulting Group, so I may be doing them a great disservice, but I think I am safe in saying that you don’t earn much kudos within those technocratic organizations by talking about furniture.
**   As Noel Coward once said.