Liverpool topped the Premier League table in November and looked poised to mount a title tilt, but a top-four finish is now the only thing they can now hope to salvage from their season.
While they could be out of the top four by kick-off at Vicarage Road on Monday, Klopp wants his players to remain mindful of how privileged their position is.
"When we were first or second in the table and all that stuff, I said the only thing we can do is to be in the battle for the interesting positions at the end of the season," he said.
"The end of the season is now, of course. It is the last month of the season and we are in the battle. So what else do we want?
"Yes, it would be nice if we had 10 points more and fight with Chelsea for the title, but that's not for us obviously in this moment.
"So we have to fight for what we can fight for and that's a Champions League place. That's really, really interesting, to be honest."
Liverpool saw a seven-game unbeaten run ended by an unexpected 2-1 home defeat by Crystal Palace last weekend.
They remain third in the table going into the weekend, but will slip to fifth if fourth-place Manchester City win at Middlesbrough on Sunday and fifth-place Manchester United prevail at home to Swansea City.
Klopp hopes to be able to call upon England pair Adam Lallana and Daniel Sturridge, both of whom resumed training with the first team on Friday.
Midfielder Lallana has been out for over a month with a groin injury, while striker Sturridge sat out the loss to Palace due to a sore hip.
Captain Jordan Henderson remains sidelined with an ongoing foot issue, along with Sadio Mane, Ragnar Klavan and Danny Ings.
"Adam is back in team training for the first time, which is very, very good news," Klopp said.
"Hendo is not on the pitch so far and there's nothing new to say about (him). Daniel is in team training again, too, and that's good.
"Now we have to train with the boys to see how they are, what shape they are in and then see what we can do with them."
Liverpool last won at Watford in January 2007, having been condemned to a 3-0 defeat on their most recent trip to Vicarage Road in December 2015.
Watford slipped to a 2-0 defeat at struggling Hull City last time out, but they have won their last three home games and have lost only one of their last seven matches on home turf.
Watford sit 10th in the table and have reached the 40-point mark that is traditionally synonymous with survival.
But head coach Walter Mazzarri says his side should be motivated by a desire to avenge their one-sided 6-1 defeat at Anfield in November, in which Liverpool went 5-0 up inside an hour.
"Liverpool will be angry after losing at home (to Palace), but I hope my players will be more angry as we lost at Hull and conceded six goals at Anfield," said the Italian.
"I want them to fight for every ball and be really concentrated."
Watford centre-back Craig Cathcart is doubtful due to a knee injury, while Valon Behrami is being monitored following a spell on the sidelines with a hamstring problem.
Younes Kaboul, Roberto Pereyra and Mauro Zarate are long-term absentees.