The former Bayern Munich ace was surprisingly overlooked by Klopp for the first leg in the Spanish capital, with Naby Kieta getting the nod instead.
The move backfired as Keita was taken off and replaced by Thiago in the 41st minute, with Liverpool 2-0 down at the time.
Liverpool improved after the break with Thiago in the side but they conceded a costly third goal after Mohamed Salah had got one back for the Reds.
The Reds will need to be at their very best to progress to the semi-finals and Merson believes Thiago needs to start if they’re to have any chance of making the final four.
‘I watched Liverpool against Aston Villa on Saturday and I was shocked, it just did not have that connection, the spark was not there,’ Merson told Sky Sports.
‘If the crowd was there on Wednesday night and they were chasing down Real Madrid, I’m all over them, there is no place like Anfield or Celtic Park on a Champions League night and I have seen them turn it around against better teams than this. But with no-one there, I just cannot see it as having no crowds at Anfield has not helped Liverpool at all.
‘It was hard for them [centre-backs Ozan Kabak and Nat Phillips] in the first leg, they are two youngsters, one lad is from Schalke, the other lad Phillips has come in and it is hard for them.
I would have tried to mix it up a bit and play three at the back, I’ve said it before, to give them more protection, with Fabinho in the middle, but the horse has bolted now and you need to get forwards on the pitch.
‘I was shocked last week that Thiago Alcantara did not play, I thought that was what he was brought in for. They won the league without him, so what was the point of bringing him in? That is his game, it is open and everybody gets on the ball and passes it – and he keeps the ball and is very composed on it. I literally thought he [Klopp] had brought him in for those occasions, they have not brought him in to win the league.’