I think your option one would lead towards a sterilization of the impact of good design. It reminds me of architecture inspired by the International Style that was soon adopted by government housing programs as a way to stay on trend and save money at the same time. However, it failed to speak to the desires of the end users.
Now let me contradict myself a little. Apple was trying to get into the home market at least since the release of the Macintosh, but they never really dominated that market until after the iMac. Why is that? The first iMac was built to a lower spec, and the design certainly aimed at reducing offense. Instead of hard edges and NASA beige, it came in a plump candy colored package.
I think it’s more than reducing offense though, it is speaking to the desires of your target market. A few years ago, I went to buy my first longboard. I was mostly concerned about the mechanical aspects of it, how I felt while standing on it, and how it handled. I had never boarded before, so it was all new to me, and I’m a naturally cautious shopper. However, after learning to ride, I’ve realized there is hardly any difference between the boards. I realized that if I were to buy a second board, I would base my decision purely on how the aesthetics of the board speak to me.
I have a feeling many markets including consumer electronics, home appliances, sports equipment, and transportation weigh heavily on how the aesthetics speak to the end user. I’ve talked with a couple design directors that really wanted to know what I thought of this question because they were in markets where consumers would make a split second decision of whether to buy their product or the competitor’s product base on their impression of some aesthetic or mechanical feature.