The main reason was the lack of CD32 exclusive games. Only a few games came out on the CD32 ONLY. From memory, these were Microcosm and Flink, maybe a few others. Later on, a few Amiga CD games came out that worked on any AGA CD system.
The rest of the games were straight A500/A1200 ports with no enhancements other than the occasional CD music or animated intro, many of them were still ECS and ran in a framed screen, the CD32 could easily handle full 320x256 screen modes with any type of game, no need to stick to smaller screens because the A500 couldn't handle bigger.
One of the better games ported from the Amiga to the CD32 was Ultimate Body Blows... at least we got the AGA graphics, CD music, and ALL of the characters and backgrounds from two big fighting games mashed up into one. That was good value compared to some of the other Amiga-CD32 games. They could have at least added a jump button to all these A500 platformers that came out on the CD32, instead of sticking to the "up is jump" for one-button A500 joysticks. A jump (or accelerate) button is much easier on a pad than pressing up.
If you read through the old magazines from 93-95, a LOT of games were planned to be released on the CD32 that made use of the CD format, AGA graphics, Akiko chip and seven-button controllers, but alas, they never saw the light of day.
Commodore's marketing wasn't too bad, they did advertise it well in Europe when it first came out, with that cool TV ad with the robot, and the big billboard outside Sega HQ, full-page ads in video game magazines and stuff. It was just the lack of special games that stopped people from buying it, and therefor developing for it.