Know-How Exchange : Strategy

Typically, all aspects of Marketing come under the purview of the Marketing department. It includes PR and advertising besides say Merchandising and Marketing Services.
The Marketing Head would in most cases be someone at a Vice-President kind of level.
The PR and advertising are sensitive functions that require liaising with external, professional agencies and media . May be in your current Marketing team no one is senior enough to handle them hence the same is being handled by the Executive team.

Ideally, there should be a functional head for Marketing because advertising and PR are specialized functional areas of Marketing too. The advertising and PR agencies should interact with Marketing Head and the Marketing team.

Responding to your specific query....
Merchandising should be a part of Marketing because Merchandising has brand/product communication in every piece-POPs, displays etc. It's important to maintain consistency in brand communication across all forms-Merchandising, advertising,PR, events etc. Hence, the need for it to be under one umbrella i.e Marketing.

Lot's of good comments here and I agree with most but I noticed that there was no talk about 'sales'??

Where do the sales team sit in your structure? At the end of the day, it is the sales team that bring in the cash.

POP's are definitely part of merchandising support but the message on the pop is intended to SELL the product I would assume. it is your sales guys and girls in the field who will actually bring the pops to the market and convince the retailers to use them (that is all part of the sales support).

Try to always make sure that your marketing and merchandising teams are coordinating very very closely with your sales team. The team in the field will bring back the most valuable data and objections to feed into the marketing message. They will hear daily the complaints form the retailers and the suggestions from the actual buyers in the stores.

Therefore - I would call it the SALES AND MARKETING DEPT. and make yourself the VP of Sales and marketing (or whomever you feel is most qualified for the role).

Hope this input is useful.

Matthew

PS: This is kind of a bee in my bonnet but make sure that your sales team and marketing teams are cross functional. In other words, make them swap roles sometimes to learn the otherside of the coin. make sure they all go out to the market from time to time and actual stand in a retail shop and actually try to sell the products to the end user customers (different fro selling it to the retailer).

There is no more valuable experience than hands on contact in the real world. Marketing people who never leave the office to actually talk to buyers are ineffective.