While it is well established that travel costs impact on customer preference toward local service providers, research about how
this situation affects competitive marketing strategies remains sparse. This article investigates, in a local market with two
competing service providers, whether service providers should undertake defensive marketing (DM), targeted at the nearest
customers who typically prefer their offering for convenience and/or offensive marketing, directed to relatively remote customers
who favor the rival as the closest alternative. We find that the service providers can exclusively undertake either DM or offensive
marketing or combine the two in a full differentiated strategy at the equilibrium. We compare the outcomes of these three
strategic options to identify the conditions under which they are worth implementing. Main findings suggest that service providers
are better off undertaking offensive marketing alone when their rival’s retaliatory offensive capacity is weak and customers incur
small travel costs. Otherwise, service providers may exclusively undertake DM or combine it with offensive marketing when
travel costs become significant. Also, service providers should not invest in any marketing activity when they have no market
power, like in the case of two adjacent outlets in a mall. Finally, the implications of these findings are discussed.
