Why is Airbus proceeding with both the A330neo and A350 XWB? Looking at the specifications for the A330neo and A350 XWB, it strikes me that the two under-development models of the A330neo are relatively similar in specification to the A350-800, one slightly shorter and one slightly longer, with corresponding variances in passenger numbers. List pricing (for what little it's worth) is approximately the same, as well.

As a result, it seems like having two distinct models competing for essentially the same market segment should just increase costs for Airbus, and it's not clear to me what the gains are. Is it easier to sell the A330neo to airlines because of it's relative similarity with the existing A330? Is the A330neo cheaper to operate than the A350 (this seems dubious given cost of operation is one of the big selling points of the A350)?

There's been some rumours about the A350-800 getting cancelled and customers pushed towards A330neo or larger A350 models; this still counterintuitive to me. Surely having a smaller range of aircraft families (i.e., A320, A350, A380) simplifies a lot (manufacturing, certification, etc.), so why increase the number of families instead of a smaller A350 model?
Actually the A330neo is already eating up into the A350-800 orders so much that they have abandoned it.

“Their A350 strategy has failed -- they’re really down to one successful model,” Boeing Marketing Vice President Randy Tinseth told reporters at the Farnborough expo near London. “If they didn’t make this choice, they’d be headed for a 30 to 35 percent share in the 200- to 400-seat market.”
Customer feedback about the A350-800 spurred Airbus’s decision to abandon the plane, said Fabrice Bregier, who leads the airliner unit at the Toulouse, France-based company. Stopping work on that jet will let Airbus focus on the more successful and larger -900 model and respond to some airlines’ concerns for fixes to the biggest version, the -1000.