on every level your cupcakes will be down in the bottom left corner, next to where drinks usually are. basically you tap the cupcake then a customer and their happiness meter will fill up completely. it's best to use them on angry customers that are about to leave
I've had the game for 9 days and already reached the end without spending a cent! I did a couple of the special offers for 10-20 gems which rarely took longer than half an hour and they added up real quick. Also make sure to regularly upgrade your customers, you get a lot of boosts and bonuses from them!!!