Using Xbox gaming app on your Windows Phone 8, you not only can track your Xbox live score, friends, and achievements but also can update your profile and create or change your avatar without going to Xbox Live website. Adequate customization options are there to create really cool avatars. You can also add head wears, accessories, shoes etc. You just need to sign in on your Windows 8 phone with the same email address, that you use for your Xbox account.
1. On your Windows Phone 8 Open Games 
2. Flick to Xbox pane by sliding your finger to the left, then tap on Join Xbox or sign in option.
3. After logging in with your Xbox account tap on the dress icon. It will start retrieving info from your Xbox account.
4. Then Xbox Avatar Designing page will appear.
5. Click on change my style. It will allow you to choose headwears, tops, dress up, accessories, bottoms, shoes for your Avatar. You can also buy premium stuffs from the store.
6. Again under change my features option you will get lots of customization options like eyes and eyebrows, hairstyle, ears, nose, chin and mouth, face, body size, color etc.
7. After creating your avatar, tap on save button to set is as your XBOX profile Avatar.
About Nick
Nick is a Software Engineer. He has interest in gadgets and technical stuffs. If you are facing any problem with your Windows, feel free to ask him.