A lot of people are locked into two year upgrade plans. When their upgrade is available they want the latest device, not one that's three years old. There are people who already have an iPhone 7 they got at their last contract renewal two years ago! It's pretty simple psychology, "I don't understand why people are confused by this".

What reason is there for the XR to exist other than to be a more affordable, new option compared to the XS? If it's failing at being a more affordable alternative, it's failing.