Consider the iPod: the differentiation was about things people would care about, like size, capacity, portability, style, etc. You weren't made to feel cheap just because you entered at the lower price points. You
wanted an iPod Mini, and it made sense that it cost less than the Classic: you were still getting "the best" version of the thing you desired.
Same story with the Mac: buying the iBook didn't make you feel like you were cheaping out, you were making a conscious choice for what you wanted, not buying "last year's PowerBook".
With the phones it's very different. Buying an old phone doesn't make you feel good, it just makes you think "I know this isn't the best, but it's all I could afford", and that's very un-Apple feeling -- especially when you still have to pay quite a lot.
Apple has apparently boxed itself into a corner, though: this is its second attempt to segment the line (the 5c being the first) and both have failed because they didn't feel like different things, they just felt like cheaper ones: the 5c was just a plastic 5S, and the XR is basically an XS with cheaper camera and screen.
So how else can they differentiate? Making a small phone won't really fly - while I'd love an SE-sized XS, the Chinese market they need to win back wants its phones big.
That only leaves the margin to cut, and that's a shibboleth. You can see why they'd much rather focus on services to escape this fix.