A thorough understanding of transit customers’ preferences and travel behaviour is fundamental to offering a high-quality urban transportation system. The dominant approach in transit quality literature is rooted in understanding current transit users’ preferences. However, disregarding the heterogeneity in transit customers’ desired quality yields suboptimal conclusions regarding their preferences. Therefore, an effective transit system should strive to understand the broad spectrum of transit and non-transit users’ preferences to increase transit ridership. Towards that end, this research aims at deciphering the heterogeneity associated with transit customers’ service desired quality. The research utilized a primary dataset elicited from an online survey that was part of Hamilton Street Railway (HSR) Public Engagement efforts in Hamilton, Ontario, Canada. The research employed state-of-the-art discrete choice models (e.g., error components logit models, latent class choice models, nested logit models) along with multivariate statistical and spatial analysis. In this respect, this dissertation quantified and unveiled latent heterogeneity in transit customers’ preferences and its implications on their willingness to pay for service improvements through various techniques and specifications. Unlike the conventional classifications for transit customers, our research classifies transit customers into three latent segments: Direct Trip Enthusiastic (DTE), Cost-Sensitive (CS), and Real-time Information Supporter (RIS). The dissertation also investigated and further quantified the influence of subjective psychological factors in shaping transit customers’ preferences towards service attributes. For instance, environmental consciousness is found to be associated with less sensitivity to walking time while higher appreciation to at-stop real-time information provision. Furthermore, the research highlighted how the built environment and its contextual effects influence customers’ travel behaviour while accounting for variations in socioeconomic characteristics. The spatial analysis concluded that the built environment's influence is not equally efficacious over geography. Overall, this research presents a unique contribution to the knowledge of public transit research for practitioners, policymakers, and academia. / Dissertation / Doctor of Philosophy (PhD)