First, let the company know your decision as soon as possible. Ask for a few days to make your decision and then contact them prior to the end of that time-frame. There may be an entire team that is just waiting to find out if they can move forward in the process and you’ll want to give them time to reach out to another candidate. The longer they wait for you, the less likely other candidates will be available to take the job.
Make sure to thank the interviewer for taking the time to speak with you and for the job offer. Chances are that several hours were put into reading resumes, vetting candidates, interviewing, and deliberating the selection.
If you turned down the position because you were offered another job that fit your needs better, it’s okay to let them know that. However, don’t use this as an opportunity to bad mouth the company. Simply say that you don’t feel like you would be a good fit for the company. After all, you never know who you may run into again during your career.
Sometimes, you can connect with the hiring manager or someone else during the hiring process but not the job. Offer to stay in touch in case other opportunities arise in the future. It never hurts expand your network during a job search.
Once you turn down a job, there is usually very little chance you will be offered it again. So make sure that you are 100% positive before you let the hiring manager know of your decision. Turning down a job and then calling back to change your mind isn't the best impression to make on a company, especially if you would perhaps be interested in another position with them in the future.