The Warriors currently lie fifth in the RaboDirect PRO12, just one point off fourth-placed Munster.
Townsend's men needed a bonus point victory over Castres, but the contest was decided by the boot with Rory Kockott kicking three penalties to Scott Wight's two.
And the Warriors coach failed to hide his disappointment after his side's poor display saw them fall to a third straight defeat in all competitions.
"The second half was horrible. Between making errors and conceding penalties we couldn't get going," said Townsend.
"We did start to string together phases in the first half and at the pause they were shown in the dressing room where there were holes in the Castres defence.
"But they never got near to exploiting them because they couldn't get going. We can produce better rugby than that - we have done already this season.
"How we react to mistakes defines us as individuals and as a group. We owe it to the fans and to each other to put wrongs to rights next week."
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