There are a few mysteries in how it works so I'm not certain, but here's my take:
You'll always be set w/ a default club for the shot pre-adjusted by the game to the exact yardage. It's then up to you to move closer/farther to offset lie/wind/rough/etc. So in your example at Sawgrass, you had 177 actual distance. If it was flat, no wind, and you hit a normal full shot, the ball will go approx 177, but of course there are green slopes etc to impact the final outcome. If in this same example the shot was up 20 feet in elevation, you would need to stretch that out to about 181y, so just use the D key to do that. If it was up in elevation 40 feet, you might need to change to a 5i, and adjust it DOWN to 185, for example.
Short shots like chip shots in particular require a shorter controlled backswing length. When you have for example a 12y chip shot from just off the green, the default presentation will be at 12y usually, and you will have to abbreviate the backswing greatly on this. The easy workaround happens when you chose 'flop shot'. For only this type of shot it seems you can just dial in the distance you're after, then take a normal full shot and all will be fine provided the swing is fine. This IS NOT true for chip shots shapes you must control the backswing on those. I'm not sure about pitch shots yet.
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