Hosting a contest or a giveaway is a great way to increase traffic to your blog. There are many different things you can offer as the prize of your contest or giveaway. You could offer any free products which you've received from doing product reviews, gift cards you've won from Swagbucks or something incredibly valuable to a fellow blogger - a blog review.
One drawback of hosting a contest or giveaway is that many people who enter the contest have come to your blog to merely enter the contest and may not stick around and read your blog. Hopefully, some of these people will become followers and return to your blog to read your new posts.
Before beginning your contest or giveaway it's important to find out the state laws regarding contests. You should also give people enough time to enter. If your blog is fairly new and doesn't have a lot of visitors each day, then you should allow enough time to attract new followers. If possible, photograph the prize so that the readers can see that you actually have a legitimate prize.
Readers can enter the contest by adding a comment to the contest post. You could also pose a question to make things more interesting such as "what is your least favorite household chore?". You could also offer readers additional entries into the contest if they Tweet or add a Facebook post about the contest and then add a comment stating that they did so. You could also set the entry rules to be that they have to become a follower or subscribe to RSS feeds. It's up to you.
It's a good rule of thumb to add a disclaimer that you're not responsible if the prize gets lost in the mail. A statement such as "I'm not responsible for any prize that does not arrive at its destination".
Now that you've posted your contest or giveaway, it's time to advertise. You could write a press release, submit your contest to contest blogs, Tweet and add a Facebook post. Here are a few sites to get you started:
When the contest deadline has arrived, randomly choose a comment as the winner. At this time, you contact the winner via email and let them know that they've won the contest and get their mailing address so that you can mail their prize (if applicable). The next thing to do is to make a post announcing the winner of the contest.
Contests and giveaways are a fun and easy way to increase your followers.