How to compete in a crowded market?

How are companies able to compete with established brands that are both objectively better and cheaper? I've been looking at these companies:

PostHog + Amplitude + Microsoft Clarity 1. PostHog has a free tier up to 1m events compared to Amplitudes 50k monthly users and offers more features than Amplitude 2. Microsoft Clarity has unlimited free events and does almost everything these other two products can yet Amplitude still has customers

Plausible + Ahrefs Web Analytics + One dollar stats 1. Plausible has 14k monthly subscribers paying >$8/month but Ahrefs does the same thing for free up to 1m monthly users and one dollar stats for only one dollar. All three products are extremely similar and sell to the same niche.

What I can't seem to figure out is how smaller startups compete with what is basically the same product that is given away for free by larger companies.

And why do companies pay more for products that are either basically the same or objectively worse? Do they just not know about the cheaper + better options and don't want to spend the time comparing products?