Some of the worst managers (and coworkers, and customers) are people who take this literally and without criticism. The phrase is a handy way to express that customer service is important, and the customer should be given the benefit of the doubt whenever possible.
That’s fine. However, it does not mean that a person turns into an infallible god upon becoming the customer of a business. The only people I’ve ever seen take it 100% seriously are customers who know they’re wrong, and managers who are too lazy to do their jobs.
I never verified, but some years ago I heard someone expand on that as meaning something like "That which makes customers willing to buy is the right thing to do". It makes sense. If a moron will buy gold plated lead, a capitalistic perspective says sell gold-plated lead. Ethically a bit fucked? Sure. But interesting nonetheless
Yeah, you're on the right track, the full quote is "the customer is always right in matters of taste". But like a lot of sayings (blood is thicker than water being another example), the original intent has been lost and now it means something else colloquially.