[Gravityloss]

Depends. If you're on the market for a time period, customer A who bought your shady competitor's product will see all its warts quite soon. Meanwhile, your own customer B will be happy with your honest product.

The fence sitters on the marketplace might ask both A and B of their experiences and opinions. They will then calibrate that against A and B marketing. Maybe one or two customers might be random, but if it repeats over a longer time, things get quite obvious to everyone in the scene...

[wtracy]

An amazing number of people make purchasing decisions without seeking advice from existing customers. There are industries where businesses almost never compare notes with each other. (Independent restaurants come to mind. Really, any field with a high rate of turnover.)

Also, the sunk cost fallacy means that some organizations will continue shoveling money at the bad system they already purchased because of the shiny marketing. If you're prepared to sell "upgrades" and consulting services around your product, it's sometimes possible to make more money from a bad product than one that "just works".

I'm not cynical enough to say that the situations I described are normal. But they are common enough.

[allendoerfer]

Which I would counter with another short phrase:

The market can stay irrational longer than you can stay solvent. Your competitors earned some money and will gain interest on it, if they are smart.

[TeMPOraL]

And because they saved the money that you spent on building a good product, they now have more money to spend on marketing than you.

[Gravityloss]

Staying solvent is fine if one is profitable.

The "market" the quote relates to is the stock market. Very different than selling products to be used.

If you invested in the product itself (instead of marketing), that can gain you something as well in the long term.