You need to feather it out a little further, and don't try to do it in one coat. When I do little patches, I angle the sides of the hole out a bit and cut a matching patch. I make sure the patch is just a hair smaller so when it fits in place, it is slightly below the surrounding surface. I use nylon tape, and use easy sand on the first coat. For the second and third coat, I have been using the dust control premix thinned just a little with water so it is creamier in consistency. It spreads well and feathers nicely. Once it is dry, I like to sand carefully, with light pressure, in a circular pattern, making sure the edges blend in well with the drywall around it.