LG Targets Apple Beats, Hopes Tone Headphone Success Boosts Smartphone Sales

Notice people wearing strange, U-shaped collars lately? It’s not some new kind of funky jewelry. These are the Tone Bluetooth wireless headphones by LG, and they may be the biggest stealth hit in consumer electronics at the moment.

LG has been long known for its TVs, home appliances and, more recently, smartphones. With the popular Tone series, the company has begun to carve out a niche in headphones. “Hopefully, it will not continue to be the best kept secret,” Bruce Tripido, director for sales, marketing and operations for LG’s U.S. accessories business, said.

Unexpectedly, LG has caught lightning in a bottle, and by rolling out promotions that bundle the Tone with its handsets, the company is hoping the headphones will give its smartphone business a boost. But not everyone is so sure about that strategy.

“Typically, accessories follow the device sales. Not the other way around,” Roger Entner of Recon Analytics said. Regardless, Entner said the Tone’s success is a boon for LG’s bottom line, thanks to the high margins typically associated with accessories. That’s why Apple paid $3 billion last year to acquire Beats by Dre, the Tone’s top rival.

But unlike Beats, which thrives off its brand, the Tone’s appeal is in its unique design and streamlined simplicity. The earbuds sit tucked into the headsets until the user pulls them out for music or phone calls. The Tone uses Bluetooth to connect wirelessly to users’ smartphones while its shape keeps it snug against the necks. That has made the Tone particularly popular among on-the-go professionals and consumers who need headphones that won’t fall off while they workout.

“If you’re not using it, it’s very unintrusive, and you literally forget that you’re wearing it,” Tripido said.

Since 2010, LG has sold millions of Tone headphones and now holds the top spot in the in-ear Bluetooth headset market. It’s also fifth place in overall headphones, behind Beats, Bose, Sony and Skullcandy, according to NPD Group. In 2015, the product will be getting a further boost as the company puts some heavy marketing dollars behind it, Tripido said.

Unexpected Success

LG saw the Tone as a way to capture the attention of consumers in the in-ear Bluetooth headset market as well as headphone users who were ready to go wireless, but LG never expected the kind of success the Tone has achieved. The device is now sold in approximately 30,000 retail locations across the U.S., including Wal-Mart, Target and Best Buy. It also comes in various models, starting with the $69.99 Tone Pro, then the $99.99 Tone Ultra and finally the $149.99 flagship Tone Infinim.

“For a hands-free, secure fit that eliminates tangled cables, the Tone series is in a league of its own,” PCMag wrote in its review of the Infinim, the latest version of the device.

In perhaps the Tone’s biggest sign of success thus far, last year Samsung and Beats released similar products. Beats introduced the Powerbeats2 Wireless while Samsung launched the Gear Circle. “While there have been numerous copycat products, I think that the Tone series of products have continued to excel because they’re built exceptionally well,” Tripido said.

In 2013, LG saw Tone sales grow 70 percent, which was impressive until the device's sales grew another 120 percent in 2014. LG believes the Tone has potential for more growth.

The Tone is “the backbone” of LG’s accessories business and a core part of its mobile division, Tripido said. LG plans to advertise it across digital platforms and get it into the hands of influencers. LG even put Tone headphones in the $168,000 swag bags given to Oscar nominees. The company also said it plans to make a major announcement regarding the Tone series in “the back half” of 2015.

But the point of the Tone series is to help LG sell smartphones, and one way to do that is by offering interesting accessories. In this case, the accessory simply became a success in its own right, and that’s good for LG, which could use a boost after losing its spot among the top five smartphone makers during the final quarter of 2014.

The Tone series “has put our accessories business on the map, and it’s a platform that we can continue to build from,” Tripido said.