Before finding the world of online poker, Dusty worked for his parents’ company that distributed non-food items to grocery stores. The inventory included toothbrushes, pots and pans, toys, balloons, and other everyday items.
While the retail business was not as fun or lucrative as poker, it had a lot to teach about pricing.
Have you ever been in a store, seen something priced
$19.99, and wondered, “What idiot thinks this is cheaper than $20 in any significant way?” Well, there’s a reason they price things at $19.99. Because it works.
“But it doesn’t work on me!” you may say. Fair enough. It doesn’t have to.
If an item were knocked down from $2 to $1.99, it would only have to make a difference to 1% of the population to make more money. This tiny markdown causes a psychological effect. There’s a reason iTunes sells songs for $.99. “C’mon mom, it’s not even a buck!”
The amazing thing is that marking an item down from $1.99 to $1.89 or even $1.79 has less of an effect than the one penny between $2 and $1.99. That’s what we call an inflection point.
Getting back to the retail business. After doing some market research at the grocery stores Dusty was responsible for, he took all of the items marked $1.79 and $1.89 and bumped them up to $1.99. There was no change in the quantity of items sold, but the profit margin expanded. He took items marked $2.29 and bumped them to $2.49. Items that were $2.79 went up to $2.99. Much to Dusty’s delight, the quantity of items sold remained virtually unchanged, while sales and profits soared. What he avoided was bumping prices above inflection points.
We’ll assume that most of you don’t run a grocery store distributorship. So how does this relate to you? You should treat your poker like a retail store.
We’ll go with an example. You’ve got K♣ Q♥ and open raise the button. Only the big blind calls. The flop comes out K♠ 7♥ 2♦ , you bet and get called. The turn is another deuce (2♣ ), you bet again and again you get called. The river is a 5♠ . The pot is about $350. How much should you bet?
You figure your opponent’s range to be king-jack, king- ten, and pocket eights through tens. You decide that he’ll almost always fold his underpairs to a bet, but he’ll almost always call with top pair. You should ask yourself what number will present a barrier for this guy. At what price will he no longer buy what you’re selling?
With the pot at $350, $300 may look too much like a pot sized bet. Now he’ll think your range is too polarized to contain the weaker kings he was hoping to beat. Don’t break that barrier. You can start with a number like $220 (about two-thirds pot) that you’re pretty sure he’ll call. But don’t stop there. Why bet $220 if he’s just as likely to call $240 or $260? Drag the bar to the right until you find the biggest number you can that won’t break the retail barrier. Don’t stop at $260 if he’s just as likely to call $290.
When people talk about selling their hand, they’re usually referring to betting small to induce a call. But don’t bet small just because your opponent may be more likely to call. Take the time to think it through as you size your bets. Sell your hand, but make them pay.