It seems widely agreed that the Luftwaffe's decision to opt for strategic/civilian bombing as opposed to continued targeting of military targets in Britain--specifically fighter bases/factories--was a catastrophic air. The British Air Force was on the ropes and a determined effort to eradicate it would have had a much more direct effect on winning the war than trying to crush British morale.

FWIW, I think the criticisms of German strategy in this effect are largely post hoc analyses informed by current understanding of the limits of strategic bombing. But that understanding is largely derived from RAND analyses of WW2 itself. At the time early WW2 air war decisions were being made, bombing from the air was considered the most terrifying and destructive innovation in the history of warfare. It is additionally worth noting that the Allies--even with the evidence of Germany's strategic bombing failure clearly evident--pursued similar policies/trade-offs with their bombing campaigns just a year or two later.