Pochettino was critical of his players’ failure to hold on to the lead given to them by Abdoulaye Doucoure’s 53rd-minute own goal.
Watford scored from two set-pieces, leaving Tottenham manager Pochettino to question his side’s approach in the wake of last Monday’s impressive 3-0 victory at Manchester United.
“I think it’s a very good wake-up call for everyone and we can listen more when people talk about the reality and not the perception,” he said.
“Today, it’s good to compare. Sometimes people talk about the perception but the reality was on the pitch and the reality is if you want to be a contender, today you need to win.”
Pochettino admitted defeat was hard to take and having seen his side challenge at the head of the table in recent seasons, he hinted his side might have underestimated Watford.
“We need to show more respect to this competition. You need to compete much better,” he said.
“It’s difficult for me to understand after four years of us being contenders. You need to show respect, to compete to win, it’s not easy.”
Pochettino questioned whether his side had shown sufficient aggression, and the way in which Troy Deeney and Craig Cathcart were able to head home unhindered from a free-kick and corner respectively supported the Argentine’s view.
“Today from the beginning we needed to go there like a lion and try to score in every single action,” he said.
“The second half we scored and then they showed more strength (and were) more aggressive in the situation.
“In every single game you’re going to find this type of situation. If you want to win you need to show that character, you need to defend well.
“Maybe you can not play so well but you need to win this type of game if you want to be a contender at the end.”
Pochettino, though, was keen to offer perspective at the start of the season and believes Tottenham’s first defeat of the campaign can help them improve.
“It’s a chance for everyone to say ‘come on we need to compete’. We need to talk about how to improve,” he said.
“And in March and April and the beginning of May if we are there, then OK, now we are contenders.
“But before we talk, we need to show that we are contenders, and how (do) you show? Winning. And the only way to win a game is to give your best.”
It was Watford’s fourth successive win and left Javi Gracia’s third-placed side level on points with leaders Liverpool and second placed Chelsea.
“Everybody is happy because to get four wins in a row is not easy and we are enjoying it, the players, the supporters,” Gracia said.
“It’s a big moment for us. But we know it’s only the beginning.”