It's a fact of human nature that the less people pay for something the less they value it. In addition those clients who push for a low price at the start are the ones who will then push for even lower prices as the relationship goes on.
It's probably too late to ever convince this client that you are a valuable supplier worth more than $40 ph but I certainly wouldn't allow them to push you any lower. I would tell them that your hourly rate is $40 ph for photography or processing. If they believe they can get the processing done for less then tell them you will be happy to supply the images to whomever they choose to do the processing.
I love my girlfriend, my dog and my canon 5DIII - even though none of them ever do what I tell them
I am learning photo graphee - see the results at www.danmarchant.com