Saturday's defeat in Johannesburg followed a debut campaign last year in which they drew one game - at home to South Africa- and lost the other five to finish bottom of the four-nation, southern hemisphere championship.
"We need to grow up, we need to learn about intensity and velocity and we need to keep playing these kinds of opponents for us to grow up," Phelan said in a blunt analysis of his team's collapse at Soccer City.
"A result like this is not good for Argentine rugby obviously, it is not a good moment. There are a lot of things we need to work on this week but the first thing will be the mentality (of the players)."
Argentina host South Africa in Mendoza in the second round on Saturday, taking their home tie back to the provincial city where they drew 16-16 with the Boks last year. They then face home and away matches against New Zealand and Australia.
Argentina's credentials are not exactly lightweight – they were Rugby World Cup semi-finalists in 2007 and quarter-finalists four years later.
Their strength in the scrums and at the breakdown was a source of much concern for the South Africans going into Saturday's test but Argentina wilted early in a nine-try romp.
Their cause was not helped by early injuries to key lock Patricio Albacete and versatile back Juan Martin Hernandez. Albacete's injury - a muscle tear - looks a lot more serious than that of Hernandez.
"We know the second year is going to be much harder than the first," added experienced centre Felipe Contepomi.
"We are up against the three best teams in the world. We had a bad day at the office."