i will sound a bit cynic but my quad core lg 4x hd using a tegra 3 chip now sells for less than 200e. if someone cannot afford a phone in this price range i highly doubt they will spend any money buying a game.and if they do it will be angry birds...
so in my opinion performance is starting to be a non significant factor.
the problem lies in available customer income vs quality of a game.
look at ios vs android sales.if you can decode the reason behind the numbers it all makes sense considering the fact that are many times more android phones out there. ios phones cost in general 3 times more than the average android phone( emerging consumer countries like china ,india etc sell the under 150$ models by millions)meaning that their owner probably has a better financial background and thus will spend more money in software.
and in the end of the day if you only had a budget of lets say 15$ for games ,what games would you buy? ray-man jungle run or our game?
but if you had a budget of 100$ then you would try and find that hidden jewel somewhere in the store.
so,from a business point of view it does not make sense to target lower spec devices .they don't spend money anyways so why bother?