Is it worth entering overcrowded markets? If so, how?

What are your strategies for entering overcrowded markets with a large number of competitors? Is it worth entering those markets at all?

One piece of advice that I heard is that your product has to be much better than the nearest alternative. If so, then how do you make it much better? It looks like it is not enough to just add a small set of new features that the users request.

Any help or advice will be greatly appreciated!