The Palermo striker is considered to be one of the senior members of O'Neill's squad, but he has not scored in the five qualifying matches in which he has played and has been booked twice and sent off once.
Lafferty's dismissal came in the 4-2 defeat to Portugal on Friday, which means that he is suspended for Northern Ireland's clash with Luxembourg on Tuesday, but O'Neill has stressed that he wants to see a clear improvement in the 25-year-old's performances when he returns from his ban.
"The reality is that he misses this game suspended and I'd say he'll miss the next two as well, that wouldn't surprise me," O'Neill told reporters. "We will address it after that. I had a good conversation with Kyle and he was very apologetic and recognises he has let his team-mates down.
"I would never say I would wash my hands of him or anything like that because he is still a player who can potentially be a big asset to the squad, but at this minute in time he is not giving us very much and he knows that.
"After quite a good start to the campaign he has contributed very little and he knows he won't have contributed very much in the second half of the campaign. He knows he needs to address that, not only for me but for the lads he plays alongside as well."
Former Rangers forward Lafferty has scored nine times in 36 appearances at international level.