The short answer is bad contractors make good contractors look bad. I had such bad experiences with contractors that I decided I would do it all myself. After all I can screw something up cheaper than the bozos I was hiring.
It all changed when my wife got into the building business and found out who the good contractors are. Now she calls a guy who comes over and does things a whole lot better than I could and when I plug in the cost of my screw ups, it works out cheaper. I still do a lot of things myself but I also know when to make the call.
I do think the small residential contractor has the biggest problem because if he is the cheapest, he will be far from the best and that only makes the reputation of all contractors suffer. The best also look for steady work and reasonable expectations from the customer so they avoid the yellow pages work or they are so far out of whack from the cheapest guy out there they don't get the jobs. The trick is convincing the customer, you get what you pay for.
Again this may be more of a word of mouth deal than advertising. Do a good job and hope the customer tells all of his friends. That is a tough business model.
