If you're reading this with an eye toward tips, chances are you're poor, or at least have better things to spend your band's nightly door take on than a bunch of merchandise you aren't going to sell. The anxiety of this is enough to lead bands to not have any merchandise at all, just a table with 15 CD-Rs of their 6-track demo.
There's nothing wrong with that at the absolute beginning stage of the game, but once you're on the road, you need to brand yourself quickly in communities that largely have no idea who you are. That's what merch is for.
T-shirts are like roaming billboards, but every band in America has them. So branch out, experiment, customize where possible, and use your merchandising to help your new fans feel connected to your work. Though there's money to be made with merch, focus first on using it as a branding expense. Especially starting out, thriftiness is key. You can't charge $5 at the door and expect to make $30 off a thermal t-shirt, so keep it cheap and inventive. Here are some ideas.
Self-printed Shirts: Who has a better grasp on your art than you? No one, that's why you should seriously consider doing your own screen-printing. It's messy, imprecise, and difficult, but each shirt you make will be desirable specifically because each shirt will be unique — and you can speed things up if you get a band-member assembly line going. That's what the Yokohama Hooks do, to great effect. Find at: Spokane Art Supply.
Slap Bracelets: Don't turn up your nose at corporate America, subvert their promotional machine for your ends. Slap bracelets were hot in the late '80s, which means they're hot again. By utilizing bulk buying and cheap corporate printing, you can move a ton of these. Like Clipse said, "we got it for cheap." Find at: http://www.bagwellpromotions.com/slap-bracelets.html.
Coke Mirrors: I would've been a much bigger Dandy Warhols fan if they had sold fake needles along with all their whining about how much heroin use annoyed them. The '07 equivalent? Handmade coke mirrors, in our estimation (for promotional use only, of course). Get a mirror, get some glass-affixing paint, make a stencil and voila. It works both ironically and straight. Find mirrors at any drug store.
Buttons: The Do-It-Yourself ethic embodied by punk culture runs throughout much of mainstream culture today (or at least the appearance of DIY), which means punkish things have a broad appeal across most scenes. Next to safety pin piercings, there's nothing punkier than little buttons. Design them yourself in photoshop, send them off to be printed. Another easy, very inexpensive option. Order from: www.oneinchround.com.
Most importantly, don't overdo it. You want people to remember your music through the merch, not make people think you've put more time into your products than your art.