The Demons have performed reasonably well since Craig took over from deposed coach Mark Neeld in round 13, defeating the Western Bulldogs in round 14 and only suffering one loss of more than 35 points (to Geelong by 68 points at Skilled Stadium in round 16).
However, after trailing by 25 points at half-time against the Roos at Etihad Stadium, the Demons capitulated in the second half, scoring just one goal to the Roos' 16.
"That sort of performance takes our club back, make no mistake about that, and I need to accept responsibility for it which I do and will," Craig said in his post-match press conference.
"So we've now got another challenge on our plate: how we respond to that and our preparation for this week, and how we actually respond on the playing field – not by what we say but by what we do next week.
"We've got a lot of work to do before we become a hard footy club, you know, a lot of work to do.
"So that's just another really tough lesson that … makes you re-adjust your thinking and gives you a real reality check of where we're actually at as a club."
Former Adelaide coach Craig has yet to definitively declare he wants the Melbourne job full-time next year, but said Saturday's loss would not put him off a return to coaching.
Craig said his and his players' focus over the final five rounds of the season would to ensure Melbourne came to perform each week rather than merely play.
"My commitment to the playing group was I would coach as hard as I could for 11 weeks, and I'll be true to my word and I'll be doing that," he said.
"The rest of it will look after itself. But it's a challenge, it's a real challenge for where Melbourne has been to and where we want to go.
"It requires a lot of resilience and grit to move up the scale and no one will give it to you. You have to have nearly a super-human perseverance, more perseverance than you could nearly ask of people.
"But that's where we're going and we will dig in and we'll keep moving now."
The 17th-placed Demons have won just two games this season and after seven seasons out of the finals still face a long climb back up the ladder.
But Craig said he and his players were up for the fight.
"I see this as a great challenge to do what we're doing at the moment," Craig said.
"If we expect it to be like [Saturday's loss] all the time, well good luck.
"(But) improvement is never a straight line, never ever a straight line.
"I have an understanding that these sort of things will happen. I don't like it, it's important that they don't become acceptable and you respond really quickly to it."
Craig refused to use the Demons' trip to Darwin last round as an excuse for their flat performance against North.
Nick Bowen is a reporter with AFL Media. Follow him onTwitter: @AFL_Nick
