Mark
Let's start from the beginning here: Pay per Click is not
SEO.
SEO is about optimising the content and structure of a site to gain ranking in the organic results.
Gaining position in the sponsored listings is Pay per Click advertising (or Cost per Click) if you prefer.
£400, and £80 per month after that? So how much of that is their fee, and how much the budget for the click costs?
Seems to me that they want to charge you a fee for setting up a campaign and managing it for you, but for 5 key phrases, £400 sounds very expensive to me. If you had 5 key "seed" phrases that they were then going to research and set up a major campaign for, then, maybe, but still sounds a bit steep. But sounds to me like you need to clarify what you're getting for your money.
But coming back to your "30%" question - in terms of PPC, it's totally irrelevant if the click rate is higher or lower than clicks on the organic listings. The thing here is you are buying traffic, and the only important metric here is not how much traffic you get, but your Return on Investment (ROI), and for that you need to consider how well that traffic converts into sales.
It's important to making sure you've got the right measuring systems (analytics, sales calls tracking etc) in place to track traffic coming from your PPC campaigns and measure sales and your net profit. If you don't get a net profit, its time to stop!
As an aside here, if you are doing e-commerce, I tend to find that traffic coming from PPC advertising tends to have a higher conversion rate than traffic from organic sources.
As Feydakin says you can go to Google now, and set up your campaign now (for 5 keywords, should only take you about 10 minutes). But if you are seriously contemplating spending significant amounts on paid search, heed semadvance's advice and get the help of a professional to help you optimise your campaign to get the best return, or be prepared to over-feed the Google-monster while you are climbing the learning mountain.