Microsoft has always tried to position their phones and tablets as "premium" devices, selling for more than comparable competitors. That's really hard to do when you are the disruptor, trying to break into an established marketplace. Google played the game right, coming into a smartphone marketplace that was dominated by iPhone, as a lower cost option that was "just as good." Over time, Android earned the respect of the marketplace, and eventually they gained dominance.
Microsoft devices were, from the beginning, more expensive than comparable phones and tablets from other vendors. But they had no killer app, and a lot less apps to offer. So why should we all pay more for less?
If Microsoft is serious about making inroads into the mobile market, they are going to have to push bargain-basement devices, until they, like Google, can gain enough market share to get a foothold with pricier models.