Setting your heart-rate zones is just as important as establishing your power zones, the two compliment each other. The most basic power paradigm is a simple dose-response one. Power is a measure of dose, whereas heart-rate is a measure of your response. While there are many books and internet articles that go into great detail on setting your heart-rate zones, there is a concise and comprehensive explanation by Joe Friel.
Step 1: Determine your lactate threshold heart rate (LTHR) with a short test. (Do not use 220 minus your age to find max heart rate as this is as likely to be wrong as right. This is explained in greater detail in Joe Friels book, Total Heart Rate Training.) This LTHR test is best done early in the Base and Build periods.
To find your LTHR do a 30-minute time trial all by yourself (no training partners and not in a race). Again, it should be done as if it was a race for the entire 30 minutes. But at 10 minutes into the test click the lap button on your heart rate monitor. When done look to see what your average heart rate was for the last 20 minutes. That number is an approximation of your LTHR.
Note: I am frequently asked if you should go hard for the first 10 minutes. The answer is yes. Go hard for the entire 30 minutes. But be aware that most people doing this test go too hard the first few minutes and then gradually slow down for the remainder. That will give you inaccurate results. The more times you do this test the more accurate your LTHR is likely to become as you will learn to pace yourself better at the start.
Step 2: Establish your training zones. Use the following guide to establish each zone: