I couldn't agree more that being a "look alike" or "me too" brand is a diminutive market position. Too many organizations choose to "best" or "top" the leader of their channel/niche/sector, etc., rather than taking a more declarative stance and surpassing them.
The folly of this approach can be seen with every tablet that has attempted to compete with the iPad so far. The iPad doesn't simply lead the category, it IS the category. EVERYBODY is second-rate in comparison, even though a few of the contenders were actually worthwhile products. They simply couldn't muster. Everybody tried to compete, having set the iPad as the benchmark. Nobody seemed to want to surpass the iPad right out of the gate, and take tablets to another level.
The surest way to stand apart from the competition is to not have competition. Consumers must view your products or services as the only option in the category.
Advertising and promotion alone aren't going to do the trick, no matter how much money is thrown at them. To work effectively (including cost-effectively) those tactics must be part of a comprehensive brand strategy.
Differentiation through branding is the way to stand out and own a category – and determine the buying decision long before the point of purchase.
Thoughtful strategy, creatively executed, doesn't have to cost those gobs of money you mentioned. That said, businesses (including entrepreneurs on start-up budgets) must view branding as a capital investment, not an expense. Cutting corners and saving a little in the beginning will surely cost you a lot more in the end.
Your points are well made… as long as these approaches are executed within an overall branding strategy.