My hypothesis about the supposed non-existence of the small phone buyer is that they very much do exist (personally, haven't bought anything other than whatever was the smallest Xperia at the time in more than a decade), but that this group has little overlap with the group willing to buy for list price on release day. But the perception of success of a given phone is very much dominated by the latter, the long tail of buyers isn't really seen. Even if the release day premium over mid-lifecycle street price (in countries where price fixing is not allowed) goes to the retailer and is of very little interest to the manufacturer.

Manufacturers should just move compacts to a three year cycle and forget everything about hyper-optimizing desirability for the kind of buyer who spends too much time reading questionable review sites.