Apple surprised everyone with the iPhone 5C, twice. Firstly that its cheap iPhone wasn't cheap, which caused many to suggest it wouldn't sell. Then by selling it by the bucketload despite the higher price. The 5C was a pretty shrewd move from Apple, boosting the retained value in each sale by utilising the iPhone 5's internals but packing a new case. The 5C didn't have the stigma of being a 'cheap' iPhone. Instead it was seen as a fun iPhone. For customers the price of the 5C met the perceived value it offered them.
Those iPhone 5 internals are getting a bit dated now though, so it's no surprise to find a revised version is being planned. Dubbed 6C by rumour-mongers, the new phone is tipped to retain a 4" screen.
I'd guess the reason for this will be a jump to using internals from the iPhone 5S, which will disappear from the range when the next iPhone update is released later this year. A good indicator is that leaked rear shells have an oval hole for the flash, matching that of the 5S. That means the 6C will benefit from the better processor and camera of the 5S, as well as gaining TouchID. If it retains its price point it will look very good value indeed.