Earlier quoted context omitted.
You're on the right track, but missing an important aspect. In most cases the company making the inferior product didn't spend less. But they did spend differently. As in, they spent a lot on marketing. You were focused on quality, and hoped for viral word of mouth marketing. Your competitors spent the same as you, but half their budget went to marketing. Since people buy what they know, they won. Back in the day MS…
Quality can lead to sales - this was the premise behind the original Google (they never spent a dime on advertising their own product until the Parisian Love commercial [1] came out in 2009, a decade after founding), and a few other tech-heavy startups like Netscape or Stripe. Microsoft certainly didn't spend a billion $ marketing Altair Basic. The key point to understand is the only effort that matters is that which…
This. Per your example, this is exactly what it was like when most of us first used Google after having used AltaVista for a few years. Or Google Maps after having used MapQuest for a few years. Google invested their resources correctly in building a product that was head and shoulders above the competition.
And yes, if you are planning to sell beer, you are going to need the help of scantily clad women on the beach much more than anything else.