How to Make drop-down button?

Just use ContextMenuStrip that shows up in a proper position when the button is clicked and you could add some image to the button that changes on MouseOver and MouseClick.
 
You can use a Tool strip and add Items.

You can use a Tool strip and add Items on the first toolstripButton.
 
Using a ToolStrip that is not docked, and using the DropDownButton or SplitButton in it is also a good idea I think. Good tip, kamiru!
 
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