Reforms using market-style mechanisms of parental choice and competition between schools are intended to leverage change by compelling schools to diversify options and increase effectiveness. Yet, some research challenges those assumptions, suggesting that schools in competitive climates are more likely to focus on image management to attract a more desirable student intake than to engage in substantive innovations to improve student outcomes. This analysis examines school responses to competition in two local education markets representing a mix of public (including charter) and private school types. School promotional signals to consumers are studied in order to understand school perceptions and responses to underlying competitive incentive structures-incentives that reformers intended to encourage programmatic improvement and diversification of options along a horizontal axis of diverse consumer preferences. A review of marketing materials demonstrates that many schools are instead adopting marketing strategies designed to attract "better" students--often from schools considered to be successful, rather than from the failing schools reformers had targeted. These patterns of vertical differentiation suggest that schools may be acting in ways that reflect contradictory incentives shaping how schools engage the marketplace. (Contains 2 tables, 1 figure and 7 notes.)