Happy to report that I figured this out thanks to the post titled: How do I know which instance has which IID? (I can't post links so I guess just search the forum for it.)
For anyone who has the same problem/question:
-- I added a new instance variable to my SpriteCustomer called "SelectedCustomer", changed it to a Boolean Variable and left the default at false.
-- In Step 1 as described in my above post, I added an action to toggle the "SelectedCustomer" variable. This sets the variable to "true".
-- Once the player avatar arrives at the customer position, I added a second condition to look for the SpriteCustomer instance that had "SelectedCustomer" set to true. The exact condition I clicked was "Is boolean instance variable set" and then chose the "SelectedCustomer" variable from the dropdown.
-- The actions to add 1 to happiness level worked perfectly.
-- Then I added one last action to toggle the "SelectedCustomer" variable again. This sets the variable back to "false" so it's ready for me to click the next customer.
Here's a picture. All the new stuff I added is underlined in blue.
The logic is still a bit fragile - for example if I click a bunch of customers like crazy the game doesn't quite know what to do. But for demo purposes it's great.