If you make higher margins but don’t lower your prices, the only other way to outcompete is to offer a broader array of services. Otherwise “outcompete” just turns into “save up more money and buy them out”.
It's often a fairly "bad for you"/"predatory" product, too, but the problem is that it's very hard to create a new entrant doing it the "good for you" way, because all that extra margin the bad guys make can be used to squeeze you out of the market. Legacy industry examples would include whole life insurance, title insurance, payday lending, and whatever it was that "Dun & Bradstreet Credibility Corp" was selling (not the historical D&B) a few years back.
I consider it enough of a pattern of "bad money chases out good" that I identify it regularly among pitches I receive.
I sometimes do the reverse when I'm in a shop that I don't have good things to say about, especially if I think they just cheated me in some legally defensible way. Like Captain Ahab trying to kill the whale with his pocket knife. Fuck you, I'm taking 1.5% of your life away!