You bring up the menu with Right bumper, then select tower or hero, depending on which one you want to hotkey. Example: Huntress piercing shot. You press RB, select hero, then you go to Piercing shot, but instead of using the Piercing shot, you hold the direction on the D-pad in which you want to 'bind' it to. If you want Piercing shot to be D-pad up. You select the Piercing shot, and hold up on the D-pad.

Make sure you actually HOLD the D-pad for a second or two, just pressing it won't do anything but using what you already have hotkeyed for that button, and also effectively closes the menu instead of creating a new bind.