That’s a great rule of thumb when your game targets a more homogeneous audience, because then you can determine the appropriate level of challenge.
Conan Exiles targets several disparate audiences and tries to give them all a way to play and have fun. You’ve got survivalists (players who like to test themselves against the environment), achievers (people who want to explore and collect everything), socialites (people who like to hang out with others and/or RP), builders (people who like to build), competitors (people who like to PVP), and probably more that I’ve missed. And most players don’t belong to just one of those archetype groups, but rather combine several aspects.
What’s fun for a builder, isn’t always fun for an achiever or a survivalist, and vice versa.
Loses its appeal for whom? Ask any builder, and most will say “Nah, this is fine, doesn’t need to be harder.” Ask some PVP players and you’ll get the same answer.
My point is that there are people here whose play styles differ drastically among themselves, and yet they agree that they couldn’t care less for making PVE harder or more challenging.
Again, some people want to play it the way you describe it. Other people want to collect one of each. Others don’t care either way.
I would rather have Funcom find a way to make the PVE combat more fun and engaging and challenging, without forcing everyone to deal with it.