What do you think is the best way to handle a submission that you are not interested in? Should you send a reply saying no and explaining why, or just say no, or not reply at all?
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What if the submission is so poor that you would never consider using it?
I think that the minimum you owe the freelancer is a polite refusal, even if it is a form letter. An explanation could benefit both you and the freelancer down the road if it is constructive and not dismissive or intentionally abusive. Your response could turn a so-so writer into a good one, or merely reinforce bad behaviors or attitudes.
Remember, word of mouth is the strongest form of advertising out there. If you tick someone off, they'll tell everyone they can how you wronged them.
Bad submissions? You can opt to direct them to another outlet & wish them luck. If you have more time, offer constructive criticism- politely, of course- and tell them your "door is always open" to future submissions that meet your guidelines.
If it is something truly awful, simply tell them that their submission was not something your company would publish. Period. Don't volunteer your opinion. Don't give them other contacts. Don't wish them luck. If they continue sending submissions to you, check 'em out. If the quality never improves, you can always send a final letter to them to cease submitting their work to you, and quietly make use of your shredder...or a hamster.
What if the idea is interesting but you're too busy or it's not your bag?
Tell them their concept has merit, and tell them about other potential outlets. If you think its really good, and you have some pull with those other outlets, contact someone with the manuscript- after asking the freelancer if its OK to forward it (some people get paranoid, and you never know someone's past history)- and then give that contact the scoop.