Every year a new phone is released, which has marginal improvements over the previous ones. But you know what? People will still buy it and Apple knows that very well.
But I will say buying an overpriced iPhone is 1. kind of a status symbol, and that 2. for most people it is safer to have an iPhone because they don't know (and don't care to deal with) policing every single Android app's permission settings. So it's not like Apple's making a fool out of them (even though I see it that way and you seem to also).
At least Android devices give you the option to upgrade. I've been forced into iOS upgrades on devices we use in the enterprise that have been made obsolete because of new bloat we didn't need (nor can we downgrade).
Other than nexus phones, all android phones are at the mercy of the carrier and manufacturer. None of them get updated on the day a new version of android comes out, most experience long delays, and many see no major version bump.
When iOS 7 comes out next week there is no doubt I will be able to install it on my iPhone.
I own a nexus 4 and can not think of a single thing which i would switch to an iPhone 5 for. The only thing it is lacking is LTE support, which ill be happy without until my next phone.
side by side, they are very similar - http://www.gsmarena.com/compare.php3?idPhone1=5048&idPhone2=...
But the amazing thing is, the Nexus 4 (16GB) is now less than half the price of the iphone 5c (16GB). I cant justify ever looking at it compared to what i already have.
I would be amazed if folks were upgrading from the iPhone 5 to the 5c in significant numbers.