This article by Matt Bircher discusses iPods, but this paragraph is relevent to the entire consumer tech sector.
The average tech nerd will look at the $149 price of the Nano and compare it to the $199 Touch and wonder why someone wouldn't spend the extra $50 to get "so much more." This question simply displays a lack of understanding as to how the market at large currently works. It's similar to someone saying "why would you buy an iPad when you can buy a Windows laptop of the same price that does more?" You can't always say what's best for people to buy based on the raw tech specs.
And yet, Android and Windows device makers still largely sell them like this.
It reminds me of a quip about Commodore's marketing department in the 80s. The Amiga was sushi, but they sold it as raw fish.