Why sometimes it is hard to find a perfect product for you?

When we are buying some product, for example, a smartphone, we face a plenty of varieties of smartphones, but we need to spend more than what we want on something which meets all our requirements. Why is this the case? I think that the companies do understand their customers, and they are doing this intentionally. Because they understand their customers' preferences, they are able to find the "sweet spot" for their customers. However, this may not be able to let the companies make as many profits as possible, especially when the companies are not in a very competitive market.

Customers generally choose the second best product, and the companies can exploit this behaviour. Companies can produce three tiers of a product. The top tier is of course the product with the best spec and a very high price, the spec is unnecessarily high for most customers and the price is also too high for most customers. The bottom tier is the product with the lowest spec and a slightly low price, the price is low but not necessarily low enough to match the spec. Since both varieties are not attractive enough for most customers, here comes the middle tier. The middle tier has slightly higher spec than most customers need, but not high enough to match the top tier; the price is high but matches its spec better than the bottom tier. Under such circumstance, customers are likely to pay higher prices than what they initially want for the middle tier.

However, when the competition increases, such strategy will not work well, because if the preferences of customers are not served perfectly, someone will enter the market and produce something that well matches the customers' general needs.