Why should I buy from you, when we have the same product?

People don't buy because you offer: "7/24 support, CCPA/GDPR complaint, easy to use UI, etc..."

They buy because they have a problem to solve. A hammer can drive a nail or break down a wall, or open a can of paint, etc... Same goes for a Sass product, it can save me time, make me more money, reduce stress, etc..

All phone's are basically the same, but we make a Small (normal sized)
Android Phone, because some people have small hands, small pockets, and just want to take a good photo from time to time. That's our differentiator.

Differentiate on value prop, and stand out by better understanding what your customer is truly solving for.

Touching on Pepsi v. Coca Cola -- things get a little different at their scale. People are tribal and build affinity to a brand. You're not so much solving a problem (thirst + a sweet tooth, maybe), but standing for something that people identify with. Typically the first to get there wins, so it's in a big brands incentive to constantly push their identity.

FWIW I haven't had a soda in 20 years, but if I do, I'm definitely choosing Coke over Pepsi!

Lots of competitors is a sign that people want what you are building.

There a few ways to stand out.

1. Niche. If you are THE solution for lawyers, lawyers talk to lawyers and you can easily show social proof.
2. Community - how can you help your customers find others who can help them? This can be create your own community or just highlight customers.
3. Causes - are you carbon neutral? Stuff like this can be a waste of time but it can help you stand out.

Also this is why influencers, content marketing, and trust becomes more important. I am seeing more of a trend with tech tik Tok influencers who are pushing SAAS and tech products.

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I just wrote a post that touches on this topic.

TLDR: Focus on a Minimal Viable Audience. Show them you truly understand them and want to help. Make sure your messages are simple and clear.

You can read the whole post here: Marketing Tips Every Indie Hacker Must Know

We have same features but I offer them totally free.

Even thought the features might technically be the same (round the clock support, data privacy controls etc.), you can still communicate them differently. Without having more info on your product or the competitors I'm fishing in muddy waters but:

• If it's the same exact target audience: Try to frame similar features in a different way. E.g. 24/7 is technically the same for everyone, but you could strive to provide the very best support quality. I deal with a lot of SaaS support teams on a daily basis and within the last 2 years the quality for basically every vendor has decreased dramatically. You can really stand out here! "Support quality" doesn't lend itself too well for sales pitches because it can't be "advertised", but over time it will help word-of-mouth a lot! You could also try to highlight it with support-specific testimonials.
  Or "easy to use UI": Show it better than your competitors. More GIFs, videos, screenshots on your website. Try to relate what's shown as closely as possible to your target audience's challenges. Don't just say the UI is easy to use, but show how easy and quick common workflows are. Every competitor of yours is providing "attack surfface". There will be parts which are too vague, too generic, too much talk too little show, not clearly enough linked to what exactly the audience is looking for etc. Find these weak spots and improve.
• If it's a different target audience: Some of the points from above hold here as well, but the biggest differentiator here is to connect the features of your product to the specific challenges of your target customers. Features of product, mapped to user problems => benefits. Use language that your target audience uses, show exactly how your product solves their problems, frame outcomes of using your product specifically in the context of them. Example to highlight this differentiation: There are a lot of easy to use Wordpress themes which can be used by people from any industry. And there are themes specifically for restaurant owners, or e-commerce sites.

What I learned over the last months is that there is always something you can do better than your competitors.

We are working for example on ERA - The New Era Of Note-Taking.
There are many other knowledge database/note-taking tools on the market, but most of them are just super heavy and bloated.

I met a lot of users who complain that it takes more time to set those tools up than they are using them actively.

Other tools may be more mature than ERA, but we will remain to stay as simple as it can possibly be.

Just analyze your competitors, see what are their strong and weak points and make it better.

In the B2B space, I think its more about how you reach target audience with a difference. Difference can be a new feature or improvement on the existing ones for particular industry segment.

For consumer products, it's all about marketing angles!

Pepsi has been very good at positioning itself as an alternative to Coca Cola trough clever positioning, sponsorship and other marketing gigs

For B2B, the choice is usually a bit more 'rational' so positionnement make all the difference If you can serve a specific niche better than competitors AND have a way to let them know, you'll win the segment

Example:
Making forms (Typeform)
Making forms for indie entrepreneurs (Tally)

People have different niche, and the bigger a player is, the more generalistic he will be (and also less receptive to feedback)

The software co's with the best distribution systems will win the market, not so much the best product. Even in highly competitive markets, there's definitely still winners. It's just hard to be the winner.