Different kids (and adults) have different brain strengths and weaknesses. Plenty of kids are J. slower on connecting those abstract shapes (letters) with sounds, and many of the children who end up being home-schooled are those who are late picking up reading. That doesn't mean they won't pick it up, J. that the supporting brain development may lag in that area. The same child may be far ahead in other areas and aptitudes.
But studies show that most children are reading at third-grade level by the time they reach third grade. Unfortunately, some children become discouraged in the interim, and learn to think of themselves as dumb, or failures. That's one of the major flaws I see with teaching a whole classroom full of kids the same reading, the same math, the same everything. They are not all functioning at that level, some struggling to keep up, and some bored and ready to leap ahead.
One of the best things you can do for your daughter is to keep reading to her for pleasure. Choose some good chapter books on topics she finds interesting. Choose some picture books with easy words illustrated. Choose some early reader books. She may "memorize" the words in those books, which is not the same thing as phonics, but it's a start and will help her build confidence.
And you might also post a letter combination of the week on your refrigerator and other accessible spots. TH is a good one because it's so common. Keep it casual, but point it out once or twice a day, write it in different short words (the, this, thin, three) to give her both a visual familiarity and a chance to hear you say the words.
Be aware, too, that there are different learning styles: some kids do best with visual cues, some with sound or music, some need movement while they're learning, etc. These differences are described in different ways by different educators, and they are controversial, but some evidence exists for incorporating them into lessons to help particular kids access and remember information better. Google learning styles for many links that will help you identify your daughter's primary learning style(s) and how to make the most of them.
I"d avoid telling her you're proud of her for getting a wrong answer, but it's terrific to praise her for trying. Continued effort in the face of repeated failure is really very brave, and I hope her kindergarten experience does not convince her she can't do it. Some kids are J. late bloomers in learning any new skill. That doesn't mean they will never get it. I think helping her resound mistaken words will help her eventually. Right now, she may be too anxious about failing, and that will get in the way of being open to learning.