For them, charging more money is the next step, like it or not.
The only way for them to compete, is to not. You buy Apple products for Fashion, to prove you can afford it.
Or at least, that's what has worked for a decade. Features is not what Apple brings, they bring Fashion.
For me, it's Apple music. I've been using iTunes since the first iPod Nano and have an extensive library. I was planning to switch to Spotify (since the android Apple Music app is abysmal). But Spotify doesn't allow you to upload your own music (lots of mixtape songs in my library).
So eventually, I gave in and went back. I even tried Google Music since they let you upload your own songs, but the sync app kept crashing and never uploaded songs right away, but your milage might vary.
So that is Apple's play, locking in customers. I know friends who came back to Apple due to iMessage and even the Apple Watch, which is a blatant lock-in product.
I don't think most people stick with Apple because they are stuck, but most Apple users simply prefer Apple devices. I used Android for over a year back in the Nexus 5 days, but switched back to the iPhone because I preferred it. Other people prefer Android which is fine.
- on the desktop app, create a new Playlist
- add local files to that Playlist
- while the desktop is online, open Spotify on the mobile device you plan on using, find that Playlist on the playlists section and press download
Now that playlist is available offline in your mobile device too.
Of course you can do all of these on Android, but I tried using Android + Surface Pro last year and the amount of things you need to install & tweak are just silly.
(a) iPhones are not that expensive if you consider they are lasting longer and being supported longer than their competitors.
(b) I don't think you understand fashion. It's not exclusive or interesting to have an iPhone when they make up half of all phones you see everyday in Western cities.
(c) Most phones these days are still being sold on contract plans and so even if phones were $10,000 many people could still easily afford it when it's broken down to a monthly payment.