Bhandari should clear his mind of two major misconceptions. First, he should look at the issue of market segmentation, an issue he has been obsessed with. The market can be segmented as popular, premium, super-premium, and luxury. In fact, these are non-issues. The most important issue in any business is the customer. Once you know who the customer is, and what his needs are, you develop a product around those needs and package it accordingly. Bhandari Textiles should therefore first identify who its customer is. Since each product is targeted to meet specific customer needs and aspirations, and those needs and aspirations do not overlap, it is important to treat each product as an independent business. That alone gives focus. It also ensures closer control and monitoring of expenses and revenues. Moreover, it pre-empts cross-financing, which is a major risk when you have a blanket approach towards product management.

Second, it is important to recognise that there is no hidden brand value that can be leveraged across different segments. Each brand is different. The image, benefits, offerings, advertising campaign, outlets, locations, price range, marketing policies, promotional aids are all different for different brands. Nor are they transferable from one product to the other. Why? Because, the customer is different. You cannot extend the equity of one product to develop and market the other. Such linkages simply do not exist. This is particularly true for textiles business, which thrives on personal tastes and preferences.

The automobile industry is a good example of how a company cannot provide disparate product offerings but ensure firewalls between two products. Consider Toyota which has built up a huge business based on value for money (VFM) proposition. Toyota is known globally as a good, dependable, and affordable car. But the company also has Lexus, a classy car that is at par with Mercedes. And note this: Nowhere in its advertising does Lexus mention that it is from the Toyota stable. The two are completely different businesses. Run independently, they have nothing to do with one another and share no common resources. The only binding factor is the ownership at the top.

The tie-up with Milano is, in my view, an independent matter. Of course, you don't need a formal JV with all its attendant requirements of investments in equity. You can have a marketing or technical collaboration or both. The relevant questions are: Are the products mutually substitutable? Is there a conflict of interests between Bhandari and Milano? Will the two complement, or compete with, each other? But it is important to identify who the customer is. It is only when you get his profile that you would be able to decide on business issues like pricing.

Bhandari Textiles should move into the popular end of the textiles market. There are several reasons why I suggest this. The popular segment provides the single-largest opportunity for getting volumes, which is a critical factor in ensuring profitability in a composite textile mill. And, given the infrastructure that Bhandari Textiles has already built up in terms of manufacturing and distribution facilities, mass marketing is the only way in which those facilities can be fully exploited. Given that the company is already incurring certain fixed costs, mass production is also the only way it can cover its fixed costs completely. Besides, it is the best safeguard against the vagaries of fashion and changing trends which are a hallmark of the premium end. Since clothing is a basic need, you are always assured of a market as long as you cater to that customer need.

But, frankly, does Bhandari Textiles know its customer? I am not sure. One indication that the company does not know its customer is that inspite of the formidable brand equity it enjoys, there is a mismatch between what the brand (as in company) stands for and the communication of the value of the brand. This, in my view, is the root of the problem. I am also not sure if the company is at all in the premium end of the market. This is particularly true of its shirts. The management believes it is at the premium end while it is actually operating at the popular end of the market. Out of half-a-dozen shirts a customer in India buys in a year, only one would be a premium shirt. That is why a marketing alliance of the kind being envisaged with Milano would be a non-starter, although the manufacturing and distribution infrastructure of the company would provide the necessary platform to build a new business.

I feel that Bhandari Textiles should redesign its distribution system. As a firm, it has been distribution-centric. It should now become customer-centric. It means that it should move from a three- or four-tier distribution to two-tier (manufacturer-retailer). It not only cuts costs but helps capture the data at the point of sale so that you not only know who the customer is, but also what he wants.

Simultaneously, the company should build a single umbrella brand. It should develop a distinct identity at the retail level. Whether a customer is buying from an exclusive outlet, a store-in-store, or a multi-brand outlet, and whether he is buying a shirt or a towel, he should be able to identify Bhandari as a brand that stands for common attributes on which he knows for certain the company will not compromise.

Premium-end does not provide growth. It can only add a sheen to the company's existing brand equity. Growth in revenues and profits comes only from the popular range. Bhandari is quite right in saying that business sustainability is possible only through mass production and mass marketing. It is true that, post-liberalisation, there has been a major shift in consumer stance in India. There is greater awareness of product quality and reliability. But that has not deflected the traditional focus on value for money. There is a degree of preference towards brand value. But this has not pushed the consumer towards fancy 'labels' that come with fancy price tags. Price is still a major factor influencing purchase decisions. In that sense, no marketer can fool the consumer with glib talk and elegant packaging.

However, the migration towards brand preferences is a proposition that companies like Bhandari should build on. This should be done through developing local brands that meet local needs. The basic requirement is that you know your customer and see what her needs are. Simple, and perhaps clichéd, as this may sound, this is the only route to success in any business.

Hindustan Lever is a good example of how you can create brands even while operating at the popular end of the market. When a brand creates trust, it automatically becomes a preferred choice for a consumer over an unbranded product. And when it becomes an icon, you can be assured of geometric leaps in the business volumes. The logic holds equally good for the textiles business.

A word is in order here about consumer psychology. Buying a shirt or a towel is not like buying groceries, where you go with a pre-determined shopping list. It is a personal decision driven by preferences of design and colour, and by considerations of quality and affordability. It is also driven by relationships. You tend to go to the same dealer from whom you bought the last shirt.

This is where Bhandari Textiles should strengthen its dealer network. Developing exclusive outlets of its own makes no sense. Look at what has happened to the exclusive showrooms that almost every textile mill in Mumbai has right outside its factory premises. There is hardly any traffic there. Why? The salesmen have neither the motivation nor the incentive to sell. It is only the owner-driven outlets that can generate volumes. They provide salesmen with the authority to go that extra mile to grab the customer. Bhandari Textiles should, therefore, strengthen the existing distribution infrastructure. That is the key to getting volumes.

The tie-up with Milano would be worthwhile only if it opens the doors to overseas markets. Limiting the horizon to domestic market is fraught with risks. Bhandari should also explore the possibility of being an outsourcing centre for Milano's fabric requirements.

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