Try this...
1. First go into your "Gallery" and select the photo you wish to use.
2. Tap that picture you have chosen.
3. Now tap the "Menu" icon (should be on the upper right corner).
4. You may at this point have to tap "other options" or the screen to bring up other options.
5. Next tap "Set as contact picture" and then tap the contact you wish to have the image.
6. If it asks (sometimes it will) select the desired app.
7. You may also be asked to adjust/crop the area of the picture to be used.
8. Then tap "Done"