Transit operators are increasingly being asked to provide services more cost efficiently. To do this, operators must find ways to reduce the costs of delivering a given level of service (in contrast to simply reducing cost at the expense of lower service levels). There is growing concern in many countries that operators are not focusing enough attention on identifying whether passengers are satisfied with existing service levels and what might be done to increase or at least preserve current service quality. This article develops a stated preference model of service quality choice that provides the set of indicators required to represent a user-based measure of service quality. The service quality index (SQI) provides an operationally appealing measure of service effectiveness to assist regulators in administering and monitoring a performance assessment regime and operators in improving customer service. SQI has been readily accepted by many bus operators in New South Wales (Australia) as the preferred way of establishing and monitoring the effectiveness of service levels, in contrast to traditional stand-alone satisfaction scores based on independent assessment of each attribute in isolation from the entire service package that passengers actually experience.