The boss spoke to PNEPlayer after North End exited the EFL Cup this evening.
The Lilywhites saw their seven game unbeaten run come to an end tonight, and the gaffer admitted it was always going to be difficult when his side went down to ten men following the sending off of Alan Browne mid-way through the first-half.
"We made nine changes from the Norwich game but we felt that the players coming in had an opportunity to come in and make an impression," said Grayson to PNEPlayerHD after the match.
"The players who played tonight have had a lot of Championship action and we did okay for 20 minutes, but we gave a real soft goal away which you can't allow and that gave them the impetus.
"Alan Browne gets sent off which makes it difficult and from then on we made bad mistakes and we allowed them too much time on the ball in the 18 yard box. We didn't stay with runners or get tight to people and that's just the basics.
"Sometimes we'd have six or seven players in the box and they'd have three or four and they were stll getting opportunities.
"We didn't defend well enough as a team and you can't allow that at any level but when you're doing it with ten men against a team like Newcastle, that makes it very difficult for us and that's what's happened tonight.
"You can imagine the frustration of us all and for the supporters who have travelled.
"Premier League teams could have come here and lost to Newcastle tonight, that's the level of the opposition that we are up against but you can't make the basic mistakes like we've done tonight. They didn't have to do anything difficult to win the game so we have to put that right for the next few games and I'm sure the game at the weekend will be slightly different."
For more reaction from the Preston North End boss, head to PNEPlayerHD via this link.