Wrong, they buy based on specs when 2 like products are side-by-side. If you took the draw of Apple away, you would see this in the smartphone realm. But if you put a PC with a dual-core processor next to a PC with a quad-core processor, guess which one sells more? AMD and Intel knew this and that's why we had the whole MHz race.
Same thing will happen if you place 2 Apple devices next to each other. Tons of people (who can afford it) will buy based on specs. And tons who cannot afford it will buy based on price and the fact that it's Apple. And some who would have bought a cheaper Android will go Apple now as well. It will be win-win-win for Apple.
You can't think about this through a spec standpoint only. The biggest factor for the average consumer is the price vs experience they'll be receiving, the Cost-Benefit Analysis.
You also can't compare computers to smartphones like this. Like i said before, the current iPhone 4 provides a great user experience already. The 1GB of RAM won't mean anything for the average consumer, unless they want Assistant. There isn't any need for these extra specs for the average consumer otherwise.
Take an iPhone 4 and an iPhone 4S, standing next to each other. The iPhone 4 is already the #1 consumer smartphone in the market, it runs iOS 5 fluidly, and is now much cheaper. Let's say $99.
The iPhone 4S looks just like the iPhone 4, has better specs, also runs iOS 5, only difference is that it runs Assistant. But, it's more expensive. Let's say $199.
The average consumer would want to save that $100, and would buy the iPhone 4, unless Assistant is a make or break feature for them.
At the end, Apple will market Assistant in a big way to get people to buy the 4S.
However, if it were between an iPhone 4 and a redesigned iPhone 5, then yes, it would be obvious that the consumers would buy the $199 model.