Loot Drops, Difficulty Levels and Rewards

I noticed that sometimes the same enemies dropped loots when they were defeated. Sometimes they did not. I replayed many battles because I was hoping that I would get loots (if I did not get any before) or get better loots. Unfortunately for me, some enemies never dropped any loot regardless of how many times I replayed the battles and killed them. However, I watched the same battles on YouTube, i.e., (Let's Play videos.) Other players got loots from those same battles, which did not yield any loots for me.

Are loot drops random? Is there anyway to increase the odds of enemies dropping loots? Would playing the game at higher difficulty increase the odds of loot drops? An example: if I fought and killed all the enemies in one single battle instead of retreating and leading some enemies away from their packs, splitting up enemies and fighting few at a time, would that lower the odds of them dropping loots?

Also, is there any benefit to playing the game at harder levels instead of easy or medium? Examples: more and better loots, more experience points for defeating enemies, etc.

Thanks.