The big difference is economies of scale. It doesn't take much R&D to release a new cereal flavor, at least when compared with designing a new camera. And the sales are many orders of magnitude higher for the cereal, so it covers the R&D costs very quickly.
By the numbers, it looks like Canon shipped around 15 million SLR bodies over the last two years. And 5Diii's are a top selling model--look at the best sellers on Amazon. There's plenty of scale. Again, research costs are not borne by individual camera models but across all their SLRs. Development costs and setting up the manufacturing line are not that costly on a per unit basis.
In the electronics industry, where the R&D costs are high and the sales volume is low, that approach leads to John Sculley's Apple, where there were hundreds of products differentiated only in tiny ways, leading to consumer confusion, poor sales, and massive financial bleeding. No surprise that the person who screwed up Apple so badly came from a company (PepsiCo) that made just the sorts of products you're talking about.
Sculley's sin was turning away from the culture of innovation at Apple, alienating the star developers and driving many out. He is still recognized today as a marketing guru, and everyone agrees his Pepsi-style sales campaigns helped build the Mac market--though I would agree that the sales structure for Macs during his CEO tenure was controversial. He just didn't understand how the tech world differed from standard products and wasn't great as the CEO of a technology company. What Jobs did to turn the company around was to return to an engineer-centric culture where ideas and highly-refined products mattered. Does Apple have too many products today? Not really, but their culture of refined technology is again weakening.
The "introduce in low-end hardware and let it bubble up" excuse just doesn't match reality. Well, it does, but only over nearly geologic time scales. Canon first tried GPS on consumer bodies back in 2011, and they were incredibly late to the party even then, having been preceded by dozens of other cameras dating back as far as 2007. The fact that it still isn't built-in across the board in their pro line in 2014—some seven years after you could get cheap point-and-shoot cameras with built-in GPS—means that Canon's rate of DSLR upgrades can only be described as "glacial".
An alternative and arguably more realistic interpretation is that Canon is savvy enough in their marketing research to know what the public will pay for the GPS feature. Just because you
want it doesn't mean that there is sufficient demand at this time to put GPS in every product. GPS also has to navigate difficult regulatory structures which reduce its value in a product.
And part of the reason for that slow upgrade speed is that they have to cover their R&D costs before they introduce a new model. The more models they sell (to what is mostly a fixed-size market, give or take), the longer each model has to be on the market before they can upgrade it again. Right now, there are three pro bodies by my count—the 1D-X, the 1D-C, and the 5D Mark III. That's an insane amount of R&D for devices that don't sell very many units. And you can bet the cost difference in the hardware among those three is orders of magnitude less than the price difference. So Canon could drastically reduce their R&D costs by folding them into one. Or, if you'd rather have two different body sizes, use the same guts in different enclosures, and update them both at the same time, every time.
Again, most of the expensive parts are shared technology. Canon cannot stop designing processors, sensors, AF technology, etc... just because they package them into fewer models. Pricing is done in part based on expected sales and market profile, as you note in your next paragraph, which undermines your argument here. The paper and layout of a college textbook doesn't differ much from a similar mass-market book, but the low unit sales establish the higher price. Canon moved into the security camera market precisely because it means selling still more camera models off of largely the same technology base (and it may become a larger market, too).
And again, this ignores the economics of creating additional product lines when your company is in a dominant position. Canon can leverage its technology to increase market share via additional products; it is not clear yet how many models the market can bear (though with the recent addition of yet another, the Rebel SL1, Canon clearly believes the limit hasn't been reached based on their sales data). Essentially your argument boils down to that you are more of a marketing genius than those stupid folks at Canon, Colgate, Campbell's, and so on. I haven't seen any evidence to support this. Your precise argument was that "There really is no good reason to have two consumer crop body lines that are barely differentiated." I have clearly explained reasons why, with numerous examples from contemporary companies (including the lens market), yet you keep insisting this is wrong based on your superior knowledge of Canon's R&D costs and unit sales. I doubt this is true. If you do know, then state clearly what the R&D costs and unit sales are for individual Canon camera lines
Actually, I'd go so far as to say that Canon's biggest problem is that they're afraid to let their low-end products cannibalize their high-end gear, so they artificially limit the features of their low-end products. If they stopped doing that, they would lose sales of their high-end gear, because there would be less reason for people to spend twelve grand on a 1D-C, but on the other hand, the only reason those cost twelve grand is that so few people buy them, so they're distributing R&D costs over a tiny niche market.
They do have to pay for staying ahead technologically, so creating high end product lines makes sense. Again, this just fails to understand how markets work. Of course Canon wants higher end products--they have much higher profit margins
. So does a Gucci handbag relative to one from Ross's. By your reckoning, Canon should give up the higher profit margins that some folks will pay per camera in order to turn out pro cameras with 7D pricing. But you failed to explain why a company should walk away from substantial profits. Canon might sell a few more camera bodies at first, but Canon's long term profitability would be hurt.
Sigma wants to produce high end lenses for the same basic reason Canon has high end bodies. Leica makes a living in a boutique niche market and profits at Leica have done well under the new management. Nikon has 7 active SLR models, with three of those high end. Funny how everyone must be wrong...
Your argument might make better sense if every major maker had a sub-$2k body that did what a 5Diii did. They don't. But if you think the grass is so much greener elsewhere and that Canon has doomed itself by producing a wide product line, reason dictates you should sell your Canon gear while you can still get a decent price on it and go. I'm staying in part because I am betting Canon will probably be the market leader for years--and I put my money where my mouth is.