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In my area, GW 40k/fantasy have been the main wargames for 15+ years. We have a great club scene and lots of regular tournaments.
However, increasingly people have become a bit jaded with GW (embargo, etc) and have moved on to other games. Warmachine and Malifaux especially have picked up a lot of players. This has actually lead to a huge fragmentation of the player base, such that you're not guaranteed to get a game of whatever you've brought along to a club because everyone has picked up a different set.

I want to get people in to Dust Warfare. I think its a great game that has a closer scale analogue to 40k than Warmachine does: a typical game has 8-12 squads of troops backed up by 2-6 vehicles.
I have the support of a local game store who carries the full Dust Warfare/Tactics range to promote this game - they're allowing me to sell some of their Dust stock, meaning I can take some boxes along to demo games and sell it afterwards if people are interested.

How should I (or how would you, or how have you in the past) go about promoting a game to the extent that you could hold an annual tournament for that game with 20+ people attending. It doesn't have to be DUST: any game that you play that not many others do. How do you build up to tournament level? Perhaps a retailer could give an example of something they've had to do to promote a new game.

I think you've answered your own question really. Try to get as many people to demo the game as possible. If they already play a different wargame it's going to take some proof to show that Dust Tactics is the superior game.

I think you'd be a lot more successful by getting people to try the game rather than just show pictures/talk to them about it.

Set up what you have, and push practice games, as well as be knowledgeable on what your pushing.

You don't have to make the game walk on water, but if it looks good on the table, you can discuss the game with a good conversational skill, and know what your talking about, you'll do fine.

People like seeing new games. Especailly if they are presented by people who know what they are talking about.

I've always found that people are most interested in a game if you are playing it. And more so if the models look cool (well painted is important here) We've had people express interest in Epic, Bloodbowl, Space Hulk, Battlefleet Gothic, Warmachine, Confrontation and other games, just from me and a buddy playing them on club nights. If we'd really tried to promote it instead of just having a laugh and rolling some dice, we could have scored a legion of new players.

Carries enough models to run demos. Have boxes (even empties) of product on hand so people can see what the model ranges look like for the game you're demoing. Be familiar enough with the rules so you can sell their strongest playing points. Also be talkative about what you really like about the game, how you were drawn to it, and what about it (focusing on your game and not the the failings of other games) that is likely to keep you playing it into the future.

And if you have access to weblinks that show off some cool paintted armies and/or the game's homepage the better.

Just some thoughts.

I'd really second what everyone else has said. I fell in love with Malifaux a while ago now, but no-one else in my area played it. So I bought two crews to use for demos, painted them up, bought all the relevant cards, markers etc. and read the rulebook virtually every night for a month. I've now got a few other people playing, one of whom nearly rivals me for obsession, and am talking to my local FLGS about whether he'd be interested in stocking it if I can garner enough interest. So really, from my own personal experience - have everything you need to demo it, make it look good and make it fun

Fell in love with Malifaux as well however while I find the inability to mathammer the game because of the card mechanic refreshing it seems most everyone else I meet locally gets grim look on their face.

As others have said. Run Great Demos with
-Full knowlege of the rules
-NIce thematic terrain.
-Well painted figures
-A really friendly manner

That's really all you can do. If it still doesn't catch on, then it wasn't meant to be.

I'm a member of a club that doesn't play any mainstream wargames, but rather than trying to promote a new scene, we just searched around for like-minded players and started a small group.

This is why Warmachine took off so well. Since they had that special hook-up for people willing to sign up to run demo games on demand.

However in my area there has been a guy running Warmachine demo's for awhile, and has generated much interest. Probably because he's a toon and likes to show off various internet broken combo's on the people he's teaching.

Best way to run a demo is to take 2 people who are interested, and walk them through playing each other.