Exactly what happened. I even had those conversations with people I know -- they liked the size but wanted the better camera. Personally, having a 13 mini and 13 Pro right now, I was quite conflicted on the ProMotion display. I love the way it feels when scrolling, but it's a big compromise to carry that lead brick around just for the tele lens and better display. Over the past year and a half, the 13 mini's size and weight won out and it's what I use as my daily driver. I just bring the 13 Pro when I go to events where I'll use the telephoto lens.With the smaller phones available not having all the flagship features, ppl compromised on size preference in order to get those features.
Then when the smaller phones sold less, Apple said “see, I guess ppl don’t want smaller phones!” And the cycle continues
If they had made a "Pro mini" by swapping out the ultrawide lens for the telephoto and put the ProMotion display in, many of us would've paid the Pro/Pro Max price for it. I'd take that any day over these 6+" models. People just want the Pro models with the best features, and they were willing to put up with the inconvenience of the Pro's size and weight for it because that was the choice.
In the premium/flagship smartphone segment, big phones will sell well no matter what because that's all you can get anymore. You can't say, "people aren't buying smaller flagships" because they haven't made one in nearly 4 years now. Arguably, the 11 Pro was the last "small-ish" flagship, though I found the iPhone 7/8 size more palatable as a good size. You either compromise by getting a now almost two-year-old 13 mini, which was already inferior to the 13 Pro as described above, or you buy a 14 Pro (or wait for the 15 Pro in a month and a half).