How do I resolve error when using the standard assets third person controller ("SetDestination" can only be called on an active agent that has been placed on a NavMesh.)?

http://forum.unity3d.com/threads/using-a-mcs-female-character-with-unitys-standard-third-person-ai-controller.377480/

I am using the standard third person AI controller that comes with Unity. I add it when creating a new Unity3D project; it asks me to pick what standard assets I should include and I pick the third person controller.

I bought, downloaded and imported the package for the MCS Female character from Morph3D.

As per Unity documentation, I added the AI controller prefab to my game object listing and the default 3D character appeared in my scene.

Then I added my MCS Female to the AI controller prefab and deleted the bundled Ethan character included with it.

When I try to run my Unity3D game, I get:

"SetDestination" can only be called on an active agent that has been placed on a NavMesh. UnityEngine.NavMeshAgent:SetDestination(Vector3)

UnityStandardAssets.Characters.ThirdPerson.AICharacterControl:Update() (at Assets/Standard Assets/Characters/ThirdPersonCharacter/Scripts/AICharacterControl.cs:29)

What did I do wrong?