Imagine there are two transit services in an area, a low quality system (L) that is pervasive (everyone is within 400 m of a low quality stop) and a high quality system (H) that is skeletal (only a small fraction are within 400 m of a high quality stop).
Imagine there are two classes of potential users, poor people (P) who will use either system, and rich people (R) who will use only the H routes.
Poor people perceive the system as larger (both L and H) and get more network externalities from the system. They can go anywhere in town on transit. Rich people see a small system, and perceive few network externalities. They can only go places on the H system.
As a consequence, poor people are more likely to use the system than rich people.
There are several solutions to this problem. The expensive solution is to build high quality services everywhere to attract the fraction of R that would not otherwise take transit. The less expensive solution is to change the perception (and reality) of the low quality system so it appears higher quality. Give it as many of the same features of H as possible, starting with information (e.g. what bus stops at the bus stop, when does it stop, what hours does it operate, where does it go, what does the local neighborhood look like, is the bus ontime, how much does it cost) and navigability.
Why do we never consider the less expensive solution?
David Levinson, Transportist 
I’m not convinced that there IS a less expensive solution, because the single most important variable for successful transit – reliability – rarely comes cheap. How do you keep your transit vehicles from getting caught in the same nasty traffic congestion from which they are supposed to provide relief? How do you save that shiny BRT from the pain of getting stuck at a slow-moving or stopped freight train? There are so many factors that can dramatically impact the reliability of any surface transportation that there is only one real solution — grade separation. And that’s expensive, regardless of whether you’re talking bus, train, or anything in between.
All those other cheaper solutions — being smart about bus stop locations, providing ontime and schedule information, building nice stops/shelters, routing through attractive areas — those are all great, but I doubt they’ll ever have more than a marginal impact on ridership. At best, you’ll be improving the ride quality of the system’s captive ridership. At worst, you’ll be taking funding away from grade-separation solutions that would help make transit a viable mode of transportation for all.
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I agree that exclusive rights-of-way provide more reliable service than shared RoW in a congested corridor. There are plenty of bus systems that are highly reliable though, and many rail systems which are not as reliable as one might hope (e.g. London Underground). The exclusive right-of-way also generally increases access time, and there is a tradeoff between travel time and reliability to consider.
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Improvements to L don’t often get made because the median voter in US metros usually isn’t close to P, and wouldn’t ride even a radically improved L unless the out-of-pocket costs of driving (gas + tolls + parking) became much higher. Considering how many decades’ worth of US transportation policy effectively aimed solely at reducing those out-of-pocket costs, L’s quality would have to near H’s in order for it to have a prayer of competing.
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Investing to inform (or, as you advocate, persuade) the H-types seems to be complementary to investment in improving the transit itself; each makes the other more valuable on the margin. When transit has recently been upgraded, there’s frequently a PR campaign aboutit. The causal link in that direction seems clear, obvious, and empirically valid. The next question is, does publicity about the merits of mass transit lead to more construction or upgrading? The late Sir Clive Granger created a causality measure to test exactly these sorts of things…
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I can think of some instances of cities improving the perception and reality of the bus system for very low cost. The Metro Rapid buses in L.A. are one good example. By making operational improvements and re-branding part of the system LA was able to get a big jump in ridership on some corridors.
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One problem is the same problem of the Military Industrial complex sighted by Eisenhower. The problem is that vendors are paid to sell objects to the monopoly provider of a service. Vendors to monopolies are rarely paid for better or cheaper operating systems. They are not paid for ideas but things.
Notably with most transit systems the question are: Who gets the benefit of the improved service? What is the business model to pay the the inovator who provides the better service? What are the current penalties for not provided efficient service today?
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