First you have to do the pattern, this way you can't make mistakes in the fabric.

pin up the pattern to the fabric, and cut.. you can use scissors.
I use a kind of gyratory knife (I don't know the name in English) like the one in the photo..

remove the pattern and start the sewing.
I do it by hand because my machine don't want to sew.. But you can use the sewing machine..
Remember to leave a space without a stich so you can turn the fabric..

inside out..

outside out..

make the letters.. again in paper..

you can use 1 color or diferents colors..

I put some 'stitch witchery' between the two fabrics, and iron it..

Put the stufed inside and do some stitches to close your pillow..
and you are done!!