Ask HN: How do I compete with other startups in my niche?

I came up with my excellent startup idea yesterday and hastily scribbled down on paper my plans. Registered a domain and I'm ready to go at it. I found my first major competition today (which I'm not disclosing, sorry) and since they offer free trials, it seems pretty obvious to just start working on cloning it. Then once I get at least on par with them, to start trying new things.

I'm sure that's not the only way to compete. What have you guys found to be the best way to compete with other startups? Changing prices? Marketing? Better products? Thinking differently? Please share your experiences!