In simple terms, a loyalty program is a structural way of saying 'thank you' for using a business on a regular basis. As a bonus, they actively encourage customers to keep using a business in order to claim prizes or rewards for being loyal. The most well known loyalty programs are frequent flyer campaigns and credit card membership rewards. Loyalty programs can be developed for just about any business, and they certainly don't apply just to large corporations.
If you have customers that use your business regularly, reward them - they are your best form of advertising. In today's modern business environment, failing to recognize and appreciate that your customers are regulars can easily cause them to move their business somewhere where they will be appreciated.
Loyalty programs can take many different shapes and forms. It can be something as simple as a discount that is offered to regular customers. My editor tells me that her local bookstore routinely gives her a 10% discount on book purchases. I visit a number of restaurants on a regular basis where every time I get the bill the owners have taken 10% off the price. I always insist that it isn't necessary, but deep down I like it. One particular restaurateur told me that because my wife and I eat at his restaurant every week and we tell lots of our friends about how good the food is, a 10% discount is cheap advertising for him.
All businesses can benefit from rewarding customers for being loyal. The hard part is to determine how you can best reward your particular customers. If there is any doubt, talk to your customers and staff. Sit down with a few people and have a brainstorming session that will identify ways to reward loyal customers. Being taken for granted is a common reason for customers changing where they shop.